The price of WA’s most important economic commodity, iron ore, has jumped to fresh five-year highs overnight as supply interruptions combine with strong demand to leave stockpiles in China dwindling.

The price of the benchmark 62 per cent product lifted 3.5 per cent $US97.95 ($142) per tonne, according to MySteel.

It was the highest level since June 2014.

Prices have remained buoyant on the back of supply disruptions out of Brazil after a deadly tailings dam disaster in January forced the closure of several mines, ripping about 90Mt out of the global seaborne supply for iron ore.

The supply crunch has also been worsened by cyclone-related interruptions in the Pilbara last month.

Meanwhile demand from Chinese steel makers has remained strong despite predictions it would weaken.

A new round of environmental inspections at major Chinese industrial hubs and predictions of a fresh round of stimulus by the nation’s government has put speculative zest into prices.

Credit Suisse predicted this week that the price of the steel-making commodity could rise to as much as $US110 ($159) per tonne between July and September which represents peak buying season for Chinese mills.

Iron ore stockpiles at Chinese ports declined by 15Mt in April.

The price rises represent a boon for WA’s big, low-cost iron ore miners including Rio, BHP and Fortescue Metals Group.

All are generating huge cash margins on their ore at prevailing prices, evidenced this week by FMG doling out a surprise out-of-cycle 60¢-a-share dividend to its shareholders.

Analysts predict Rio and BHP shareholders could also enjoy bigger than expected payouts when the mining giants report results in August.

Smaller producers such as Roy Hill, Mt Gibson and Mineral Resources will also benefit.

Rio Tinto revealed last week it generated an extra $US2 billion ($2.9 billion) in free cashflow for every $US10 ($14) per tonne lift in the iron ore price.

The price lift also represents a windfall for the State Government, which could expect an extra $1 billion more in royalties this year if the price is sustained ore more if the price lifts further.

The Western Australian Government has based its budget on iron ore averaging $US73.50 ($106) per tonne over the next 12 months, and $US65.60 (95) per tonne in fiscal 2021.