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I don't think it's tied into the story like that.
CF items got a big overhaul at one point, called standardization. So, probably there was way too much iron out there and we decided to place it more strategically.
There's still a ton of easy-to-get iron weapons, but its not standard anymore, since, y'know. That would suck too much for elves. Just like mithril isn't ubiquitous because, y'know, dark-elves. Neither are difficult to obtain, however. Splntrd
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