The Metal Bulletin iron ore spot price reached $US94.86 per tonne on Tuesday, the highest price since mid-2014, and remains above $94/t overnight.

Demand for high-grade iron ore has increased in recent weeks, which Power put down to the high price of coking coal, the number of production shutdowns through the harsh Chinese winter, and the current high margins on steel.

FMG’s average realised price for the December quarter was $64.87 per dry metric tonne, a 91.7% realisation on the Platts 62% CFR index, but Power said the spread was opening up.

“We have seen quite a widening between the 62% Platts index and the 58% indices,” Power told reporters yesterday.

“But at $95 per tonne, the margin we’re making on all products is exceptional given our low cost base.”

Power said despite higher-than-expected prices, FMG maintained a positive outlook for the iron ore market, and he didn’t rule out it moving higher in the short-term.

“It’s very hard to [forecast] because there’s so many factors driving the price in the short-term,” he said.

“I think we will see it moderate back to more historical levels.”

Despite high port stocks (of mostly low-grade ore), Platts believes the rally could have further to go.

“Strong price momentum should carry through into March and possibly beyond, particularly if steel prices rise further due to government-mandated steel production cuts,” it said.

Investec expects the iron ore spot price to remain above consensus levels for some time yet.

“Chinese rebar prices continue to signal that iron ore prices seem set to remain strong and if this proves the case then iron ore producers will continue to reap the rewards of prior year investments,” it said overnight.

BHP Billiton CEO Andrew Mackenzie told analysts on Tuesday that Chinese government policy had made bulk commodities “a little bit more investable than they would otherwise have been”.