Chinese iron ore futures rebounded on Tuesday and were on course for their second-biggest daily gain this year, with traders saying some steel mills had made a surprising return to the market, sensing that ore prices might be near the bottom.

Some mills had started restocking even though trading is normally quiet ahead of the Lunar New Year holiday, which falls in mid-Feburary. Some expect iron ore could find support at $60 after losing nearly half its value in 2014.

Benchmark 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI fell 0.7 percent to $61.30 a tonne on Monday, its 11th straight drop, according to data compiled by the Steel Index.

But on Tuesday the most active iron ore futures for May delivery on the Dalian Commodity Exchange were up 1.5 percent at 480 yuan ($77) after touching 482 yuan, the highest since Jan. 23.

Chinese steel mills had refrained from buying in recent weeks as a sharp fall in steel prices and sluggish sales had forced many to curtail production, curbing appetite for iron ore.

"Buying interest has picked up since yesterday as some expect further downside room for iron ore to be limited, but due to the weak market fundamentals for steel, restocking will be limited," said an iron ore trader in Shandong province.

Imported iron ore stockpiles at major Chinese ports SH-TOT-IRONINV fell for the second week in a row last week, down 1 percent at 98.8 million tonnes as of Jan. 30, according to data provider Steelhome. But that was still 6.7 percent higher than the same time last year.

However, there are growing expectations that steel prices could get a lift after the New Year holiday.

"Some traders are hoping the market will improve after the holiday, given current market inventories in a few big cities are about one-third lower than a year ago, mills are still cutting production and demand will pick up from the winter lull," said a second trader in Shanghai.

The most traded May rebar contract on the Shanghai Futures Exchange was down 0.6 percent at 2,482 yuan. The price has fallen 4.3 percent so far this year.