The most briskly traded rebar contract for October delivery on the Shanghai Futures Exchange rose 1 yuan to 4,815 yuan a tonne by 0333 GMT, heading for a fourth straight gain.

The contract remains near an eight-session high, having hit a three-month low of 4,627 on March 22, but is down 1.6 percent this quarter.

"The abundant liquidity of the past two years created a huge build-up in steel inventories, but this year tighter liquidity will mean building additional inventory will be very difficult," said Henry Liu, analyst at Mirae Asset Securities in Hong Kong.

"The cash situation for consumers is still adequate so it is too early to say they will dump inventory," he said.

"In iron ore, the second quarter will be weaker than the first. Prices will fall, with support At $160 to $165 but the downside is limited as Chinese steelmakers are running at full steam."

China's daily output of crude steel rose 2.6 percent to a record 1.945 million tonnes from March 11-20, figures from the China Iron and Steel Association showed on Tuesday.

CISA said daily output stood at an average of 1.92 million tonnes in the first 20 days of the month, up from 1.823 million tonnes in February and 1.703 million tonnes in January.

According to Reuters calculations, average daily steel output up to March 20 stands at 1.81 million tonnes, which would amount to 659.5 million tonnes on an annualised basis.

Key iron ore indexes, based on spot transactions in China, rose on Tuesday.

Platts 62 percent iron ore index rose 50 cents to $169.50 a tonne, including freight, and The Steel Index's 62 percent benchmark gained $1 to $167.40.

Metal Bulletin's 62 percent gauge rose $1.12 to $167.97.