LAUNCESTON, Australia (Reuters) - - When is a bull market not a bull market? When it is in iron ore.

Cranes unload imported iron ore from a ship at a port in Rizhao, Shandong province, China, December 6, 2015. REUTERS/Stringer

The steel-making ingredient is currently on a winning streak, with Asian spot prices at 20.3 percent above the most recent low hit in December last year.

Thus iron ore sneaks into the definition of being in a bull market, having surpassed the 20 percent mark that somewhat arbitrarily designates a rally as being significant.

But looks can be very deceiving. The Dec. 11 trough of $37 a ton was actually the lowest recorded since spot assessments began in late 2008.

The close on Wednesday of $44.50 means iron ore is a mere $7.50 away from the all-time low, with the modest gains in absolute terms providing context to the more impressive percentage rise.

Still, a savvy trader who bet on a price rise after the low will have made handy profits, something increasingly difficult to do in the new paradigm of low and volatile commodity prices.

While iron ore has had a few good weeks since mid-January, it’s very unlikely that this is the start of any sustained rally, rather it’s more likely an opportunity to go short again.

The recent price gains have been driven mainly be seasonal factors, which are already likely passed.

On the demand side, Chinese steel mills and traders generally build inventories ahead of the Lunar New Year holidays, which are being taken this week.

On the supply side, the major export harbor of Port Hedland in Western Australia state was shut in late January as a tropical cyclone passed over it, contributing to a 17.6 percent drop in shipments on a month-on-month basis.

Shipments from Brazil, the largest exporter after Australia, were also slower in January, dropping 37 percent month-on-month, due to temporary closure on environmental grounds of Tubarao port, which handles about 100 million tonnes of iron ore a year.

REALITY TO BITE

With the temporary factors over, iron ore will once again be confronted with the reality of vast oversupply and tepid demand from China, buyer of about two-thirds of the world’s sea-borne cargoes of the commodity.

It’s worth thinking back to the last time iron ore was in a so-called bull market, in the third quarter of last year.

The spot price rallied almost 33 percent from a low of $44.10 a ton on July 8 to a peak of $58.50 on Sept. 10, after which it fell relentlessly to the low in mid-December.

It’s also safe to ignore announcements of minor cutbacks in production, such as the expected loss of about 4 million tonnes this year at South Africa’s Kumba Iron Ore, the country’s largest producer and a unit of Anglo American.

This is spit-in-the-bucket levels of production losses, given the market is now oversupplied by at least 100 million tonnes.

This means only output cutbacks by the big four miners, Brazil’s Vale, Rio Tinto, BHP Billiton and Fortescue Metals Group, will make any difference, and so far there is no sign of this happening.

The forward curve for iron ore swaps traded on the Singapore Exchange <0#SGXIOS:> show how unlikely it is that the current rally will be sustained.

What the recent price gains have done is merely steepen the backwardation of the forward curve, with the front-month contract at a 30 percent premium to the 12-month in early trade on Thursday, up from 20 percent three months ago and 6.5 percent a year ago.

In iron ore, the futures market appears to be telling a more compelling story than the spot market.

(The opinions expressed here are those of the author, a columnist for Reuters.)