Iron-ore prices to remain at about $100/t in 2025, BMI says

Market research firm BMI, a Fitch Solutions company, has maintained its 2025 iron-ore price forecast at an average of $100/t, expecting continued downward pressure owing to weak demand stemming from a subdued outlook for mainland China amid its sluggish property sector.

In a market commentary published on November 18, BMI notes that iron-ore (62% iron content) prices at Qingdao port are currently hovering below $100/t at about $95.7/t as of November 8, with the year-to-date average in 2024 thus far being $105/t.

After hitting a multi-year low of $85/t on September 23, prices rebounded sharply to $103/t on September 30, in the wake of Chinese stimulus announcements.

However, the rally proved to be short-lived, with prices trending downwards into early November, struggling to breach the $100/t mark, despite Beijing's efforts to reinvigorate the property sector.

While better-than-expected manufacturing purchasing managers’ index (PMI) data lent some support to prices, after it returned to expansionary territory in October, persistent weakness in Chinese demand, coupled with rising iron-ore inventories, sustained downward pressure.

BMI expects iron-ore prices to continue to be hit by a weak demand outlook, barring additional support measures from mainland China in the coming months.

The firm says iron-ore prices are likely to remain highly sensitive to potential stimulus announcements, with market sentiment skewed towards expectations of further support in light of anticipated rekindled trade tensions under a second Donald Trump Presidency in the US.

As such, the extent of any provided stimulus would be crucial in determining whether it can turn the tide for the iron-ore market.

On the demand side, steel production in China and thus demand for iron-ore still remain sluggish, with property sector weakness adding to the grim picture.

According to the World Steel Association (worldsteel), during the first nine months of this year, China's production of crude steel declined by 3.6% year-on-year, with production in September having decreased by 6.1% year-on-year.

While China's manufacturing PMI surprised to the upside, returning to expansionary territory for the first time in six months, registering a reading of 50.1 in October, compared with 49.8 in September, the ongoing property downturn still shows little sign of reversing, BMI said.

During the first nine months of this year, investment in the real estate sector declined by 10.1% year-on-year, after falling by 10.2% over January to August, while new construction floor starts contracted by 22.2% year-on-year from January to September.

BMI notes that the recently unveiled raft of stimulus measures present an upside. However, the firm’s country risk team highlight that addressing the property market downturn will be a multiyear effort, given the scale of unfinished projects and unsold housing stock.

The firm adds that the growth impact from the debt swap programme announced in November also seems to be limited, with the country risk team maintaining its real GDP growth forecasts at 4.8% for this year and 4.5% for 2025.

While China's imports of iron-ore remain elevated, rising by 4.9% year-on-year over January to October, with demand turnaround expectations and a lower price environment acting as a tailwind, they are likely adding largely to stocks.

BMI note a strong build-up of iron-ore inventories at mainland Chinese ports, rising by 31% in the year-to-date to 149.9-million tonnes as of November 8, which has the potential to place a cap on prices in the coming months.

Outside of China, steel production and demand for iron-ore remain muted so far, BMI points out.

According to a recent worldsteel report, global crude steel production declined by 1.9% year-on-year over January to September, with September registering a sharp year-on-year decrease of 4.7%.

Steel production in India, Germany, Turkiye and Brazil outperformed, rising by 5.8%, 4%, 13.8% and 4.4% year-on-year, respectively, during the first nine months of this year.

That said, this was offset by steel production downturns in other key markets, including Japan, the US, Russia, South Korea and Iran. During January to September, Japan and the US registered year-on-year steel production growth rates of -3.2% and -1.6%, respectively, while steel production in Russia and South Korea dipped by 5.5% and 4.6% year-on-year, respectively.

On the supply side, iron-ore production remains healthy across major miners, BMI says.

Iron-ore shipments and production broadly increased for most majors, with miners aiming to maintain their production levels.

BHP achieved record iron-ore production of 260-million tonnes in the 2024 financial year ended June 30, a 1% year-on-year increase, and set its 2025 financial year production guidance at between 255-million and 265.5-million tonnes.

Fortescue maintained its iron-ore shipments guidance for the 2025 financial year at 190-million to 200-million tonnes, slightly up from the 191.6-million tonnes reached in the 2024 financial year.

Vale's iron-ore production guidance for 2024 was recently revised upwards to between 323-million and 330-million tonnes, up from the previously expected 310-million to 320-million tonnes.

Lastly, Rio Tinto's 2023 iron-ore shipments rose by 3% year-on-year to 332-million tonnes, with the diversified miner setting its 2024 guidance at between 323-million and 338-million tonnes.

Looking beyond 2024 and 2025, BMI expects iron-ore prices to follow a multi-year downtrend. The firm says it maintains the view that iron-ore prices will consistently trend downwards, as cooling steel production growth and higher iron-ore output from global producers will continue to loosen the market.

In the long term, BMI forecast prices to decline from an average of $110/t for this year to $78/t in 2033. While significantly lower than the average of $156/t in 2021, the $97/t yearly average that BMI forecast for 2024 to 2028 will still be higher than the 2016 to 2020 average of $78/t.

The firm said China's slowing demand growth will be the main driver of lower prices, a trend that is now already in its early stages. However, a structural shift away from industrial, steel-intensive sectors towards services and less-steel-intensive infrastructure will have a negative impact on iron-ore demand.

This shift in China’s economic growth trajectory is expected to depress steel consumption and production growth rates, BMI said.

While domestic steel production was allowed to significantly outstrip steel demand over the past decade, with the resulting surplus exported, the firm expects production growth to be brought more closely in line with domestic consumption patterns in the coming years.

Based on these forecasts, BMI expects China’s yearly iron-ore consumption to peak before the end of the decade, while iron-ore demand across Asia more broadly will continue to grow, but at a very slow rate.

Consistent with this shift, BMI expects an increased focus on green low-carbon steel globally, which requires much less iron-ore and is produced at electric arc furnaces, compared with the current blast furnace production model that requires high levels of iron-ore and coking coal, which is highly polluting.

The firm says that heightened pressure on environmental conservation through regulatory and voluntary commitments will be an impetus to driving changes towards greener steelmaking.

As the EU’s Carbon Border Adjustment Mechanism takes effect, a growing number of startup steelmakers have started to create green steel for industrial use.

In the EU, all major steelmakers are involved in either research or pilot projects to test low-carbon steel production processes. The US may examine similar trade measures to foster domestic investment in greener steel production as well.

These trends also pose further downside risks to BMI long-term iron-ore demand forecast, such that demand may peak sooner than the firm currently expects.

Risks to BMI’s current price outlook exist on both sides, given current volatile economic conditions, it cautions.

The firm says iron-ore prices will head even lower than its current outlook if China’s economic momentum remains weaker than expected. On the upside, a stronger recovery in China’s property sector will be the major influencer driving demand and supporting iron-ore prices.

Meanwhile, supply constraints at producing mines could also push prices higher.

Also, unforeseen weather conditions in the wake of La Niña developing towards the end of the year, as well as labour and energy issues, could pressure key producing markets, including Australia and South America.