A happy new year for iron ore prices but will it last?

Iron ore has started the year on a positive note but there are differing opinions as to whether the worst is over for the steel-making ingredient.

Following a horror 2014 which saw iron ore lose 47 per cent of its value, the commodity showed some strength as the New Year commenced.

It is currently trading at $71.26 a tonne, a rise of 6.6 per cent since hitting five-year lows of $66.84 a tonne in mid-December.

While the rise is still 40 per cent lower than the prices seen at this time last year, it has led to the uptake of struggling mining stocks.

Smaller iron ore miners BC Iron, Mount Gibson and Atlas Iron all shed jobs as the iron ore price squeezed break-even prices last year.

However over the last week the miner’s share prices have seen double-digit gains.

It comes as Morgan Stanley analyst Tom Price told the SMH that the worst of the price downside may be over.

"The major factor that undercut ore prices in 2014 was the Australian-led supply surge,” Price said.

But with this surge far from over, others say the price of iron ore won’t stay above $70 a tonne for long.

Goldman Sachs recently said the global iron ore surplus could hit 300 million tonnes by 2017 as new mines and multi-billion dollar expansions come on board.

Deputy secretary of the China Iron Steel Association Yang Zunqing said iron ore will remain on a downward slide as demand from the country’s property sector weakened.

“The iron ore price will remain on the downward track while the coal price may stabilise or rebound slightly,” Yang Zunqing said.

CitiGroup expects the iron ore price will average $60 a tonne this for 2015 and 2016.

The Federal Government has also cut its iron ore price predictions to $63 a tonne.

"The current market oversupply is expected to prevail through the start of 2015 in response to a likely ongoing cyclical downturn in China's housing sector," Bureau of Resources and Energy Economicssaid.

"Prices are forecast to rebound in the second half of 2015 as some producers cease production and housing construction activity in China starts to recover; however this rebound in the housing sector remains a key area of uncertainty."

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