King of the iron ore cash pile

Australia's Mr Iron Ore, Andrew Forrest of Fortescue Metals, must surely by laughing (on his way to the bank?) as the world's leading broking houses scramble to upgrade their iron ore forecasts for 2013.

Forrest, we now realise, has been well ahead of the pack in recent times renegotiating debt agreements and laying off staff when iron ore was at a low point back in September.

As the spot price of iron ore has rocketed to an amazing $158 a tonne – up almost 90 per cent since the September low point of $86.90 – it looks most likely that universal iron ore price expectations have been too conservative.

As the outlook for China iron and steel consumption improved over recent months, Forrest and his team have been working on an in-house forecast of $120 a tonne… to many observers this price was unrealistic.

But this week a raft of higher iron ore forecasts have pushed the market consensus to $126 a tonne for the year ahead. Behind that consensus figure there is a wide disparity – as low as $114 a tonne at Deutsche Bank to as high as $140 a tonne from Goldman Sachs, but the message is clear... iron ore prices this year will be much stronger.

Fortescue is a pure play iron ore company. By implication the dramatic price rebound means that the market must once again reassess both Forrest and his company, known to its supporters as the 'third force in iron ore' (behind BHP Billiton and Rio Tinto). Indeed the Fortescue decision to restart its 'Kings' Pilbara project, which means its production targets are back on track, demands such a reassessment.

Forrest is so nearly a great industrialist… the Fortescue operation in the Pilbara is one of the most impressive private enterprise projects in a generation. But he has an uncanny ability to puncture his own reputation with distractions and misdemeanours.

Last year as Forrest finally cleared his name with ASIC over an eight-year long case in relation to continuous disclosure he marched off to court again with a bid against the mining tax. As he was campaigning against modern-day slavery in mid-2012 with the Walk Free movement, Forrest laid off 1,000 workers from what he had regularly described fancifully as the ‘Fortescue Family'.

Perhaps in 2013 an older and wiser Forrest – he's now 50 – may finally become an industrialist who gets the respect he desires: A respect equal to the admiration once meted out to his historical predecessors, industrialists such as Essington Lewis at BHP or Russel Madigan at Conzinc Rio Tinto.

Certainly, Forrest's decision to bring in the former Thiess executive Nev Power has been a step in the right direction, with Power's pragmatic approach offsetting the more colourful actions of his chairman.

At $158 a tonne iron ore prices will most likely retrace later in the year, but with consensus forecasts of an elevated price compared to 2012 Forrest looks like he is in a sweet spot once more. Whether he can finally ascend to the first rank of Australian industrialists remains an open question, but it's clear Forrest has never had a better chance than this.