WA's top development mandarin says iron ore prices are unlikely to rebound from $US100 a tonne in the near term, undercutting more optimistic forecasts from the State's miners and placing a fresh question mark on projects, including Oakajee port.
Department of State Development director general Steve Wood made the comments to the Upper House's Estimates and Financial Operations Committee yesterday.
Mr Wood said in the absence of a massive but unlikely new stimulus package in China, which would boost demand for the key steelmaking ingredient, prices would stagnate around, or slightly below, the current $US104/t for the foreseeable future.
"Some would say that the iron ore price has come back to levels that are more historic for the State, and I think that is the case," he said.
"No one would expect that it's headed back up to the $US160/t to $US180/t level unless there is a major stimulus package in the Chinese market. My view is that it stays somewhere just above or below the $US100/t mark."
However, a raft of miners including Andrew Forrest and Gindalbie's George Jones predict the price will recover to between $US110/t and $US120/t, giving them a crucial buffer from rising costs.
Analysts suggest that sustained falls below $US100/t will force companies to cut expenditure and will stall prospective projects. It will also hit the State's royalty income.
Mr Wood said the latest developments were adding to the difficulty of getting the Oakajee project near Geraldton started, even though he conceded limited port capacity had become a problem for the State.
"Oakajee port and rail is a very hard project," he said.
"It's not like a Pilbara project where you take a load of hematite and send it down a rail line, which is hard enough as it is."
However, Mr Wood said that if funding and other hurdles could be overcome, Oakajee and the associated magnetite mines in the Mid West would have a competitive advantage because their refined product was more suitable to Chinese steel mills and attracted a premium price.
Mitsubishi-backed Oakajee Port and Rail, which has the front-running in attempts to build the project, has previously cautioned people against talking the venture down. It declined to comment yesterday, but has previously said that it is designing the development for the long term and eventually expects it to be viable.