Thanks @irynka, great article For the those with...

Thanks @irynka, great article For the those with Sundaymorningitis:

IRON ORE:

The iron ore price continues to defy predictions that it is headed south in a big way. The current price of $US214/t is more than double the 2020 calendar year average of $US105/t and $US60/t higher than its price on December 31.

Monster global stimulus in response to COVID and Vale’s struggle in Brazil to meet its production targets have been the shorthand explanation for the steel-making raw material’s stellar price performance.

Of the two factors, it is supply-side issues that are starting to look more permanent than analysts, who have iron ore’s retreat to say $US130/t come FY23 and sub-$US100t in the following years, might suspect.

And it is more than Vale’s woes. It is also about the Pilbara and the impact of the new importance given to traditional owner heritage issues over the once free-wheeling ability to bring on the mine expansions and new developments needed to offset mine depletion, let alone increase overall output.

It is one to be sorted out by the political process. The big three of the Pilbara – Rio Tinto (ASX: RIO), BHP (ASX: BHP) and Fortescue (ASX: FMG) – can be part of the debate, but it’s not one they can solve.

How all that hits future production levels in the Pilbara remains to be seen. But the pressure on annual tonnages in a more restrictive development approval environment is going to bite at some point.

While no one is suggesting iron ore will be like lithium and enjoy a perpetual supply deficit, the pressure points are building. Apart from the record global steelmaking, there is pressure on Vale every time it rains, and the building pressure on the Pilbara in a post-Juukan Gorge world.

Better perhaps to just focus on the here and how. The iron ore price is what it is and it looks like it will remain elevated until well into 2023, if not beyond. That means spectacular dividend flow from the Pilbara big three.

The Vale and the yet to be fully appreciated Pilbara pressure points are also good news for the juniors that have got into production or are busting to get into production. The current price is dream stuff for them.

The potential for new junior producers like Fenix (ASX: FEX), 37c a share) to earn more than its market cap in a year has been mentioned here previously. And then there is the incentive and market support for iron ore juniors like CZR Resources (ASX: CZR, 1.1c) to get cracking with its project.

Smaller tonnage and less intrusive iron ore plays don’t come with the same heritage protection issues the monster mine developments of the Pilbara attract. But the returns at the current elevated pricing can be particularly sweet on any metric.