Is China's Year of the Ox commods binge all bull?

Marius Kloppers, Forrest's opposite number at BHP Billiton, the world's top miner, is also optimistic.

"The de-stocking is essentially complete," he said last week.

Both the government and the iron ore miners have an interest in talking up the steel sector: the former is eager to reassure the world that economic growth will not go below 8 percent; the latter are locked in annual iron ore price talks, with a healthy steel market the best argument for a high iron ore price.

They can point to a 7 percent rise in Chinese steel exports and output in December. For a graphic, please click here

But that may be due to the government scrapping export tax on high value-added steels such as cold-rolled products, which are used in autos and home appliances and have dire demand prospects.

The demand recovery is a mirage, some say.

"Such jumps have never proven sustainable without an underlying recovery in property construction or related real import demand," said Jonathan Anderson, an economist at UBS.

"And here we have no real sign as yet that things are stabilising, much less set to rebound tomorrow."

China's steel mills are running at 70-80 percent of capacity, up from from about 60 percent in early November and nearly double the 40 percent seen in the United States, according to Macquarie.

"China's move to raise production in particular is a concern, with the government encouraging steel exports by cutting the export tax," said Christina Lee, an analyst at Macquarie.