BEIJING: Iron ore futures prices retreated on Friday, but were on track for a second straight week of gains as demand improved in top consumer China.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) ended daytime trade 0.34% lower at 871 yuan ($120.30) a metric ton. It is, however, posed for a 5.3% rise for the week.

The benchmark May iron ore on the Singapore Exchange was down 0.12% at $116.7 a ton, as of 0705 GMT, but up 5.1% so far this week. “It’s normal to see ore prices consolidate after recording significant gains over the past two weeks, with some traders liquidating parts of long positions to lock in profits,” said Pei Hao, a Shanghai-based analyst at brokerage Freight Investor Services (FIS).

Average daily hot metal output among steel mills surveyed climbed for a third straight week, up 0.7% week-on-week to 2.26 million tons as of April 19, while profitability rose to 48.48% from 38%, data from consultancy Mysteel showed. However, a more than 15% price gain so far this month sparked fears that China’s state planner may step in to rein in the rally.

“A more significant rise in prices of raw materials than steel will squeeze margins among mills, denting their buying appetite for raw materials including iron ore, thus weighing down corresponding prices as well,” FIS’s Pei said. An official from the state-backed China Iron and Steel Association (CISA) said the association has attached great importance to the crude steel output management policy this year, according to a post on the WeChat account of CISA on Thursday. Other steelmaking ingredients on the DCE advanced, with coking coal and coke up 0.39% and 0.37%, respectively.

Steel benchmarks on the Shanghai Futures Exchange were mostly down. Rebar shed 0.3%, hot-rolled coil edged down 0.26%, wire rod dipped 0.54%, while stainless steel added 2.09%.