SINGAPORE – Spot iron-ore prices rose to one-week highs as some Chinese steel mills continued to restock ahead of the Lunar New Year holiday, although buying interest was lean.

Data showing that activity in China's factory sector quickened to its fastest pace in two years should back further gains in iron-ore, but steelmakers may only aggressively boost their inventories of the raw material again if steel demand picks up pace.

The HSBC flash purchasing managers' index for China rose to 51.9 in January, the highest since January 2011, as manufacturers received more local and foreign orders.

Shanghai steel rebar futures climbed to a seven-month high on Thursday after the data, but soon surrendered gains to trade lower.

The most active rebar contract for May delivery on the Shanghai Futures Exchange was down 0.8% at 4 020 yuan/t, after rising to 4 067 yuan/t, its loftiest since June 26.

Benchmark iron-ore with 62% iron content climbed 1.2% to $147.7/t on Wednesday, according to Steel Index – its highest level since January 15.

"Some mills are still replenishing, they still want cargo, but they don't want the price to move up so much. That's why we are seeing limited deals," said an iron-ore trader in Singapore.

Price offers for imported iron-ore in China, the world's biggest importer, were steady on Thursday.

"We have not bought any new cargoes. We're still clearing all our stocks before the Chinese New Year," said a trader in Shanghai, adding his company hopes to sell its remaining 40 000 to 50 000 t of iron-ore inventories at higher prices to recoup losses from previous cargoes.

The reopening of Australian ports after a brief shutdown owing to a tropical storm will ease worries about supply in the spot market and could make this week's price gains fleeting.

Iron-ore hit a 15-month top of $158.5/t on January 8 in a rally that began in December as Chinese mills rebuilt stockpiles. The price fell more than 8% before regaining some ground this week.

More iron-ore restocking by Chinese steelmakers just ahead of the Lunar New Year holiday in mid-February could boost prices further, although a sustained rise will hinge on the strength of China's steel demand.

China's steel demand is expected to rise 3.1% in 2013, 0.6 percentage points higher than last year as the economy recovers, the country's steel industry association said on Tuesday.