Iron ore capped the biggest weekly increase since the start of August as traders and steel mills in China sought to replenish inventories after returning after a week-long break.

Ore with 62 per cent content delivered to Qingdao rose 5.4 per cent this week, the largest gain since the five days to August 7, according to Metal Bulletin Ltd. Prices climbed 0.1 per cent to $US56.01 a dry metric ton on Friday.

"It could just be a short-term phenomenon where traders and mills come back from holidays and want to stock up a tad," Daniel Morgan, an analyst at UBS Group in Sydney, said by email. "Would be surprised if it held. Demand is still patchy, anaemic, sluggish, so not a great picture from that end."

China's financial markets and most businesses were closed October 1-7. While iron ore rallied this week, it's still 21 per cent lower this year as Rio Tinto Group and BHP Billiton boosted low-cost supplies amid forecasts for the slowest Chinese growth in more than two decades. The price gains probably won't last as the slowdown in the Asian nation's steel industry deepens, according to the Australia & New Zealand Banking Group.

Data this month showed the purchasing managers' index for China's steel industry, which has shown contraction for more than a year, falling to 43.7 in September from 44.7 a month earlier. Readings below 50 indicate shrinkage. The country makes more than half of the world's steel and purchases about 70 per cent of global seaborne iron ore.

"Prices also seem to be forming solid support around $US50 a ton, attracting bottom-fishing recently," said Mark Pervan, ANZ's head of commodity research in Melbourne. "Port inventory data will be well watched after gaining for the past two weeks. A big bounce in Brazilian iron-ore exports in September suggests another port inventory gain is on the cards, snuffing out this week's relief rally."

Port inventories in China, which are tracked as one gauge of demand in the largest user, climbed 3.8 per cent in the three months to September, snapping four quarters of declines. Holdings were at 82.4 million tons on September 25, the highest level since July, according to the most-recent data from Shanghai Steelhome Information Technology.