iron ore price, page-2

Cyclone lifts iron ore price

December 30, 2013 12:00AM

THE price of Australia's key export -- iron ore -- will start 2014 on a firmer footing as bad weather here and abroad hits the world's largest producers of the steelmaking ingredient.

Australia's key iron ore port, Port Hedland, was in lockdown last night ahead of Tropical Cyclone Christine, forcing BHP Billiton and Rio Tinto to stop loading ships.

Brazilian giant Vale has called force majeure on several iron ore contracts because of heavy rainfall in the southeast of Brazil.

In response to the cyclone, which is expected to intensify as it moves towards the Pilbara coast today, Rio said ship loading had stopped but its mine and rail operations continued to operate.

BHP said it was monitoring the cyclone and working with relevant agencies, including the Department of Fire and Emergency Services.

"Port Hedland and our Yarrie mine are on blue alert and we are progressively securing port, rail and mine infrastructure and tying down equipment at these sites," a spokeswoman said.

Port Hedland, Australia's biggest iron ore port, evacuated ships ahead of the official closure of the port yesterday morning.

Fortescue Metals Group, which also operates in the region, said it was preparing for the cyclone, conditions were being closely monitored and plans would be updated accordingly.

Any setbacks to production will help underpin a healthy iron ore price at the start of the year.

The price of iron ore has enjoyed a solid year, despite forecasts at the start of 2013 that it would struggle.

It has ended the year at about $US134 a tonne.

Rio Tinto boss Sam Walsh has said erroneous forecasts that iron ore prices would slump to $US90 a tonne or lower this year showed that many analysts failed to grasp that Chinese domestic supply was drying up and that new projects were difficult to develop.

Mr Walsh told The Australian just before Christmas that he expected iron ore prices to be softer in 2014 as some new supply entered the market, but he believed Chinese demand would remain strong.

RCF Ambrian analyst Duncan Hughes said the long-term consensus for iron ore prices appeared to be moving towards $US100 a tonne, from around $US80 a tonne a year ago.

"The recent strength and resilience of the iron ore spot price has been one of the most positive surprises in the commodity markets this year," Mr Hughes said in a mining report.

"The key driver of this has been higher-than-expected Chinese steel production," he added.

"Although it should slow, the pace of Chinese steel output so far this year remains well above expectations."

Mr Hughes said that over the next decade he expected the rate of replacing high-cost tonnes with new lower-cost output to be the main influence on iron ore prices.

Gina Rinehart hopes her $US10 billion ($11.2bn) Roy Hill iron ore project in the Pilbara region in Western Australia will produce into a strong market.

That operation is closer to becoming a reality as debt funding is finalised. The total debt funding secured this month is at almost $US3bn.