The price of iron ore has jumped to its highest level in over three weeks.
Benchmark iron ore for delivery to the port of Tianjin in China was trading at $US71.10 a tonne, a rise of 2.3 per cent.
But it is not expected to stay at this level.
Oversupply and a struggling Chinese real estate market has analysts predicting it will only be a matter of time before prices head south again.
“For the major Australian miners, the exit of higher-cost Chinese production is the key to a stabilisation of the iron ore price – assuming that demand is at least a neutral factor,” J.P. Morgan equity strategist Paul Brunker said.
“With further supply growth coming from the low-cost producers, requiring even more withdrawal of inefficient players, it looks like a long slog for the iron ore price.”
Recent export numbers out of Port Hedland seem to back this theory.
Official figures from Port Hedland show it shipped 34.4 million tonnes of iron ore last month.
This is 23 per cent more than the same time last year.
Brazilian iron ore miner Vale last week warned that if prices continued to hover around $US70 a tonne, 220 million tonnes of seaborne iron ore would be uncompetitive, SMH reported.
Vale's executive director of ferrous, Peter Poppinga, also said a rise in the iron ore price hinged on high cost operations existing the market.
"In 2016 we will have some new supply still coming but it will be in the order of magnitude more or less of the depletion of other mines, so one will cancel out the other and additional demand will kick in and that will bring the price up again," he said.