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The iron ore spot price ended 2015 at $43.57/t and fell as low as $39.51/t in January.

But a rally saw the price hit $70.46/t last month, though it closed at $55.05/t overnight.

“A solid bounce in prices that started in January turned into a fully-fledged bull market in March as growth from the ‘old economy’ in China boosted sentiment,” ANZ said.

“This in turn saw speculators pile into the iron ore futures contracts on the Dalian Commodity Exchange, with trading volumes surging to 50 times the levels seen in January.”

The trading frenzy saw the Dalian exchange implement higher fees and shorter trading hours, with everyone from cab drivers to hospitality workers trading paper iron ore.

“Chinese people are gamblers. You go to Las Vegas, you'll see a lot of Chinese. You go to Macau, you'll only see Chinese. So they like to gamble. And the Dalian Commodity Exchange is another casino for the average Chinese,” Cliffs Natural Resources CEO Lourenco Goncalves noted last month.

Despite the volatility, ANZ noted that fundamentals had improved and demand for physical cargoes had been consistently strong.

“This is backed up by the data – for example, steel production has increased as the housing market improved,” it said.

“While sales and prices have been strong for six months, we have now started to see a pickup in construction activity in the housing market in China.”

Supply side issues were also contributing, with Roy Hill’s ramp-up slower than expected, and guidance downgrades for BHP Billiton and Rio Tinto.

ANZ said Chinese domestic production was down around 10% in the first quarter.

“However, because of falling iron grades, we calculate that the iron units China has produced over this same period is down over 20%,” it said.

“If maintained, this should see the market return to balance by early 2018; some 12 months earlier than we originally expected.”

JP Morgan agrees that the market should be “less oversupplied” in 2017, but said iron ore prices had overshot on the upside due to speculative buying.

Analysts warned the price looked “frothy” and could pull back sharply as junior miners and Chinese producers were incentivised to start or restart production.

Despite a bearish view, JP upgraded its 2016 price forecast to $53/t and its 2017 forecast to $48/t, both up by $6/t.

The Australian government used a forecast of $55/t in the federal budget last week, while the Western Australian government expects the price to average $47.70/t in FY17.