FORTESCUE Metals Group’s chief financial officer, Stephen Pearce, has called the bottom of the bear market for iron ore, saying he believes the price of the valuable export commodity is set to rebound to about $US110 a tonne and remain there for some time.

But Mr Pearce, who is viewed as a possible future chief executive of the company, also warned that the days of boomtime prices of $US150 and above were probably over, signalling an end to the revenue bonanza for companies such as Fortescue, Rio Tinto and BHP Billiton.

He said last week’s mini-rally in the iron ore price, which pushed above $US95 a tonne after falling to an almost two-year low earlier this month, suggested that the trough in the current cycle had probably been reached.

Mr Pearce made the assessment based on the strength of key Chinese economic data, the decline in iron ore stockpiles at China’s ports and the fact that the market was now adjusting to the increased supply levels from the major Pilbara producers in recent months.

“What we’ve seen over the last six months, since September last year, is a lot of new supply come in from Rio, BHP and ourselves in particular,” Mr Pearce told The Australian.

“When you bring on infrastructure, it’s not a precise science that you can just dial up.

“Infrastructure tends to come on in lumps and therefore you get supply flushed into the market in step changes and I think we’ve seen that in the last six months.

“I think it will take another month or two for the market to ¬digest that and for the market to respond.

“But I think we’re perhaps already seeing early signs of that in the marketplace as we’ve just gradually crept off that $US90 level and potentially seeing some early drawdowns of stock at the ports, maybe subtly indicating we’re just stepping off that ¬bottom.”

The iron ore price has plunged by about 30 per cent this calendar year, falling as low as $US89 a tonne on June 16 amid continuing doubts about Chinese economic growth and the Asian giant’s demand for commodities.

But Mr Pearce said much of the doom and gloom had been overdone, and he preferred to focus on longer-term Chinese economic data, which suggested ongoing strength.

“I think people sometimes look at short-term statistics from China and I think that’s a little bit dangerous,” he said.

“In my mind, (it’s) the six-month and 12-month trends that are really more important.

“When you step back and look at those, steel usage is up 6 per cent year-on-year, and that’s pretty healthy. It’s probably higher than what people were anticipating.

“In my view, we may well see the same sort of trend we saw last year, when there was a higher level of fixed-asset investment and steel utilisation in China in the second half of the calendar year than there was in the first.

“I’m not expecting the (iron ore) price will rebound to the $US140 level anytime soon. But I think it will re-emerge and settle around that $US110 mark … for a period of time as new supply gets digested and as the Chinese domestic market adjusts to where the new pricing points are.”

Mr Pearce said Fortescue remained highly profitable even with iron ore trading around $US90 a tonne, meaning it was a “very, very different” company than during the bear market of 2012, when prices fell as low as $US86.70.

Fortescue’s near-death experience in September 2012 prompted it to lay off 1000 employees and refinance billions of dollars in debt while continuing to expand production from its Pilbara operations.

It now has a break-even price of about $US70 a tonne, but this is based on the headline iron ore price (for 62 per cent Fe) rather than the reduced levels at which Fortescue sells most of its product.

The current break-even price is well down on the $US90 levels that threatened Fortescue’s survival almost two years ago.

“I sleep very well at night,” Mr Pearce said. “Our cost position is 34 per cent down on where it was in 2012.

“We are now producing tonnes on to the ship at $US33-$US34 a tonne — that’s very different from where we were at $US50 a tonne two years ago.

“We generate very healthy margins at these ... pricings.”