SHANGHAI: Dalian iron ore futures extended gains on Tuesday, as traders remained optimistic about the near-term demand outlook amidst low inventories and a slower-than-expected pace in falling consumption due to production cuts among some steel mills.

The most-traded January iron ore on China’s Dalian Commodity Exchange (DCE) climbed 1.65% to 862 yuan a metric ton, as of 0203 GMT. “Although hot metal output has recently been on the decline, the falling pace is relatively slow with the current output still at a comparatively high level for the period,” analysts from Shengda Futures said in a note.

Rio Tinto, the world’s largest iron ore producer, reported a 1.2% rise in its third-quarter iron ore shipments, as it ramped up production at the Gudai-Darri mine.

Improved steel demand also boosted sentiment, with daily transaction volumes of construction steel products climbing to 208,200 tons on Monday, the highest since May, data from consultancy Mysteel showed.