China's iron ore futures rose for a third session on Thursday as spot prices rallied to three-week highs after miner Vale SA downscaled its production outlook for the first quarter, but concerns over the coronavirus death toll kept gains in check.

The Dalian Commodity Exchange's most-traded iron ore contract ended up 1.6% at 624.50 yuan ($89.43) a tonne. Earlier in the session, the contract rose up to 628 yuan, its highest since Jan. 23.

"Signs of softer demand for iron ore should limit the upside," ANZ commodity strategists wrote in a note. Steel traders in China are holding off returning to the market for their usual post-Lunar New Year purchases, dampening demand as the epidemic has brought factories and the construction sector to a standstill.

Indicating faltering demand, the inventory of construction steel rebar in China has piled up to the highest since April 2019, SteelHome consultancy data showed. Iron ore futures on the Singapore Exchange were virtually flat at $85.86 a tonne in afternoon trade, surrendering early gains.

Despite weak demand, spot iron ore prices scaled a fresh three-week peak on Wednesday, with the benchmark 62% grade settling at $87 a tonne, SteelHome data showed. Spot prices rallied after Brazil's Vale on Tuesday revised its iron ore production forecast for the first quarter to 63 million tonnes-68 million tonnes, from 68 million tonnes-73 million tonnes, citing the impact of recent heavy rains on its operations.

China-bound iron ore hit a five-year peak at $126.50 a tonne last July on worries over tight supply, but retreated and settled at nearly $90 by end-2019. "The market is still recovering from the supply shock of Vale's dam failure in Q1 2019, and Vale says it will struggle to increase production this year.