Iron-ore hit its priciest in almost two weeks as some Chinese mills rebuilt stockpiles, although upward momentum could be short-lived as steel producers curb output amid slow demand.

Stockpiles of steel products at big Chinese producers surged to a record 14.52-million tons as of mid-March, industry data showed on Wednesday, forcing mills to cut average daily output to 2.064-million tons during the period, down from 2.085-million tons in the first ten days of the month.

Benchmark 62% grade iron-ore rose 0.8% to $137.10/t on Tuesday, its highest since March 13, based on data from information provider Steel Index.

"Some mills, particularly the small- and medium sized ones, are now relatively low on inventory after having stayed clear of the spot market for some time," Steel Index said, and their purchases had helped to raise prices.

Iron-ore had recovered more than 3% since hitting this year's trough in mid-March, but still remained 14% below the 2013 peak.

But traders said the rise could soon stall.

"This round of increase will be short-lived. The steel market is still bad, and that will not be able to support a further increase in iron-ore prices," said a trader in Rizhao city in China's eastern Shandong province.

Prices of iron-ore stored at major Chinese ports rose by between 10 yuan/t and 20 yuan/t this week, he said, tracking gains in prices of seaborne material.

China's daily crude steel output hit a record 2.21-million tons on average in February as mills boosted production, hoping demand would see a rise from March onwards, as they had every year, when construction activity resumed from the winter freeze.

But demand had yet to pick up pace since the end of the Lunar New Year break. Inventories of steel products held by
traders hit 22.51-million tons by March 15, data from industry consultancy Mysteel showed, also an all-time high.

Stocks fell for the first time in 14 weeks last week, but by less than half a million tons, according to Mysteel data.

The most traded rebar contract for October delivery on the Shanghai Futures Exchange was up 0.6% at 3 906
yuan/t ($630/t) by the midday break. Rebar, used for construction, remained 11% below this year's peak.

Traders were eyeing more spot tenders for pricing cues, including Brazilian iron-ore offered on Wednesday, after miners
sold cargoes at firmer prices earlier this week.

BHP Billiton sold a cargo of 62.7% grade Australian Newman iron-ore fines at $138.88/t at a tender on Tuesday, traders said. It was BHP's first sale tender of Newman fines since early January, traders said.

That followed Rio Tinto's  sale of 61% grade Australian Pilbara iron-ore fines at $135.80/t on Monday.