Iron ore price spike

The price of iron ore has jumped by three per cent to $65.10 a tonne.

The price rise comes ahead of the Chinese New Year, a time which sees steel mills stock up on the commodity.

It is also thought Chinese authorities will take moves to stimulate growth in the economy, spurring reinvestment.

Iron ore is now 6.5 per cent higher than it was earlier this month when it hit a five-year low of $US61.10.

Some analysts think the price could rise even further if high-cost producers start existing the market.

Last week Rio Tinto CEO Sam Walsh said he expects 80 million tonnes of iron ore will come out this year, with another 85 million tonnes at risk.

"We're not saying the 85 million mt will definitely come off, but they are higher-cost producers and they will have to drastically reduce their costs," Walsh said.

However, others suggest Chinese miners with high-costs won’t be so quick to stop producing, with a large number owned by steel companies.

This has led to bearish predictions that the price could fall to lows of $US40 a tonne as the three majors – BHP Billiton, Rio Tinto and Vale- pump out record volumes of ore into a flooded market.

The impact of the slump in the price of iron ore will become clearer today, with Fortescue Metals Group set to announce its half-year results.

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