Iron ore's rally from a decade-low offers investors an opportunity to bet against the commodity as prices will resume their decline amid weak demand and rising supplies, according to Goldman Sachs.

"Market fundamentals will reassert themselves sooner rather than later," analysts Christian Lelong and Amber Cai wrote in a new report, maintaining their forecast for prices to average $US52 a metric ton this year. "Investors may consider this as a window to take short positions."

Iron ore rallied into a bull market last month as BHP Billiton said that it would curb the pace of its expansion and Vale signalled it may cut some higher-cost output. The gains came as stockpiles at ports in China fell to the lowest level in more than a year, and the government boosted stimulus to combat a property-led slowdown by cutting interest rates. Prices remain 67 per cent below a 2011 record amid a global glut and concern demand in China may have peaked.

"The structural drivers of the iron ore price trump cyclical drivers and they are unchanged since mid-2014: demand is lacklustre, supply growth continues and prices must overshoot on the downside to force high-cost mines to close," Lelong and Cai wrote. The endgame remains the same, they said, without giving recommended trades for investors to bet on declines.

Ore with 62 per cent content at Qingdao, which bottomed at $US47.08 on April 2, rose 2.6 per cent to $63.02 a dry ton on Monday, data from Metal Bulletin Ltd. showed. Prices climbed 9.3 per cent last week, narrowing this year's drop to 12 per cent.

"I don't see the rally in iron ore lasting," Vanessa Lau, senior analyst at Sanford C. Bernstein & Co. in Hong Kong, said by phone after cutting price estimates in a report. "When we look at the longer term, the iron ore price is still determined by steel demand."

Iron ore is seen at $US54 a ton this year and $US50 in 2016, down from previous forecasts of $US75 for both years, Bernstein said in the report. Steel-demand growth in China fell last year and may contract further in 2015, the company said.

Recent production announcements from Vale and BHP are cosmetic and will do little to address oversupply, according to Investec Plc. The commodity is likely to decline again later this year, Wolfe Research LLC analyst Gordon Johnson said.

"No major producer has revised their long-term production targets downward," Goldman's Lelong and Cai wrote. "The rally is taking place during the early stages of a long bear market that in our view is set to last well into the next decade."

The gain in prices, which offered miners an opportunity to hedge future output, came as shipments from Brazil and Australia posted a shortfall of about 6 million tons last month, according to Goldman. That prompted mills to draw from inventories, with port reserves declining, the bank said.

Shares in Australia's listed miners have mimicked the strong rebound in the iron ore price, but with Chinese growth forecast to soften in the second half and supply to remain high, the price of iron ore and resources stocks may still suffer.

'THE RALLY ISN'T AN INFLECTION POINT'

"A return to normalised export growth in Australia and Brazil is likely to result in a gradual increase in inventory levels and allow prices to resume their downward trend," Lelong and Cai wrote. The rally isn't an inflection point, they said.

China's central bank cut interest rates for the third time in six months, effective from Monday. The economy grew in the first quarter at its slowest pace since 2009 amid the property slowdown. More than half of China's steel demand is driven by construction and infrastructure, according to Bernstein.

Inventories at China's ports fell about 5 per cent to 92.15 million tons on Friday from April 30, Shanghai Steelhome Information Technology said on Friday. That's the lowest level since January 2014, according to Steelhome data.