Iron ore prices have jumped more than 12 per cent since the end of China's Golden Week holiday as traders and steel mills in the country return to the market.
The buying activity marks a shift in attitude among Chinese traders and steelmakers, who triggered a 36 per cent collapse in prices to less than $90 a tonne in just two months by stepping back from the market and running down stocks.
On Tuesday the spot market for benchmark Australian iron ore with 62 per cent iron content rose to $120.25 a tonne - up 12.4 per cent in two days and the highest in nearly three months - according to Platts.
Liberum Capital said the bounce was the "first evidence that a fourth quarter restocking in iron ore might be under way".
The move to restock bodes well for the leading iron ore miners, Vale, Rio Tinto and BHP Billiton, who have been hit by the sharp fall in prices in recent months. Rio shares were among the best performing on the FTSE 100 on Tuesday morning, rising 2.4 per cent.
It also suggests that the gloom that has prevailed among Chinese industrial companies for much of the past six months may be lifting.
"They certainly feel the government is doing things to support growth here and there," said Colin Hamilton, head of commodities research at Macquarie. "At the margin they're slightly more optimistic but I wouldn't say they're gung ho yet."
A senior industry executive characterised the shift as "turning off the destocking" rather than out-and-out restocking. "They are keeping themselves where they have security of supply chain without restocking," he said.
Analysts at Liberum said they expected iron ore to "bounce in [the next six months] as domestic Chinese infrastructure projects sanctioned as part of the stimulus announced in May this year impact demand". Beijing last month approved plans for Rmb1tn ($158bn) in infrastructure spending.
In addition to a slightly more upbeat view of demand, the market is being supported by a drop in iron ore supply, analysts and executives say, as the fall in prices makes higher cost miners unprofitable.
Rio Tinto said on Tuesday that its analysis suggested 100m tonnes of Chinese iron ore capacity had become unprofitable, compared to global seaborne iron ore trade of 600m tonnes. The miner said it had seen "evidence on the ground that a large proportion of this has already been curtailed".
Moreover, Kumba Iron Ore in South Africa last week said that strikes had forced it to halt production at the Sishen mine, which produces about 40m tonnes of iron ore. If the strike remains unresolved, it would only be able to continue supplying customers until mid-October, it said on Monday.
"The situation has made the Chinese marginal buyer a little bit worried about sourcing material from the seaborne market," said Mr Hamilton.
Nonetheless, analysts believe that slower Chinese growth and a shift away from investment in construction is likely to prevent iron ore prices from reaching their previous peaks of almost $200 a tonne. "Prices may struggle to maintain levels seen for the majority of this year" of more than $140 a tonne, Liberum said.