Iron ore has hit yearly highs after temporary supply disruptions from Australia and Brazil sent the metal back over the $US45 per tonne mark – although it may not stay there for long, analysts warn.
Iron ore was trading at $US45.52 on Friday – a rally of over 15 per cent from the year's lows of $US39.51 recorded in mid-January. Those lows were just over a dollar higher than the six-year lows hit in December.
However, shipments from Port Hedland in Western Australia were disrupted following Cyclone Stan in late January, while in Brazil earlier that month the federal court ordered the closure of Vale's Port of Tubarao – one of the world's most important iron ore terminals – following pollution concerns.
Port Hedland iron ore exports in January were 33.78 million tonnes, down 10 per cent on the 37.547 million tonnes loaded in December. The sharp decline left volumes down 8.1 per cent from a year earlier, the steepest percentage decline on record.
In February alone the price of iron ore has increased over $US3 per tonne, helping a rally of over 8 per cent in blue-chip miners BHP BIlliton and Rio Tinto on Thursday.
"There's been a bit of temporary tightness in the market driven by weaker-than-expected exports," said ANZ senior commodities analyst Daniel Hynes.
Chinese restocking ahead of Chinese New Year – the week-long celebration beginning on Monday – had also played a role, said Mr Hynes.
This week's sell-off in the US dollar, the currency in which iron ore is priced, had also helped.
However, Mr Hynes said the supply disruptions were temporary and short-lived and prices would soon reverse. "We would expect prices or push back below $US40 over the next few weeks," he said. "The demand picture remains weak and we're expecting supply growth to resume outside these disruptions."