* Many smaller iron ore producers remain closed
* Rally in prices has not gone high enough for restarts
* Analysts see prices easing in 2017
By Manolo Serapio Jr
MANILA, Dec 21 While this year's spectacular
rebound in iron ore prices has been a godsend for the world's
biggest miners, it has not gone high enough for smaller,
less-efficient producers that still have pits shuttered and
The price of the steelmaking material .IO62-CNO=MB has
nearly doubled in 2016 to above $80 a tonne, a boon for miners
such as Vale, BHP Billiton and Rio
Tinto which extract the material at a cost of
less than $20 per tonne.
But smaller producers from China to Sweden still face hard
times as their output costs can be as much as $100 a tonne due
to lower grades and fewer economies of scale.
"Every mine I know remains shut down," Pan Guocheng, chief
executive of mining company China Hanking Holdings Ltd
, told Reuters by phone.
He said about half of production capacity is closed in
China's northeastern province of Liaoning, where Hanking's mines
are located. The company has shut three smaller mines in the
last few years.
"This price increase is not sufficient enough to let (mines
in the province) reopen with some new capital injections."
Hanking is among a handful of privately-owned iron ore
miners still in business in China, with many closed as a global
glut slashed prices to a record low of $38.30 a tonne in
December, 2015 from a peak of $191.70 more than four years
Elsewhere, Swedish state-owned mining firm LKAB will
mothball its Mertainen mine as it would not be profitable to put
it into production, resulting in a $128 million asset writedown.
And in Iran, private iron ore miners are hesitating to
reopen as they are not confident the market will "sustain at a
high level" for a substantial period, said Keyvan Ja'fari
Tehrani, head of international affairs at the Iranian Iron Ore
Producers and Exporters Association.
Iron ore has largely piggybacked on the strength in prices
of Chinese steel amid Beijing's campaign to slim its bloated
steel sector and efforts to stimulate its economy. That fed
bullish bets in China's futures markets, lifting spot prices by
But Julius Baer analyst Carsten Menke said "prices have
moved too far, too fast" and sees them recoiling to $65 in three
months, before dropping to around $50 a year from now.
Goldman Sachs analysts see iron ore at $62 a tonne in 2017
and $47 in 2018, saying that while supply and demand may be
relatively balanced next year, the price could "fall toward the
marginal cost of production in 2018 as supply outpaces demand".
(Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)