Commodity prices will remain sensitive to incentives announced by the Chinese authorities
Analyst firm BMI, a part of Fitch Solutions, has maintained its iron ore price forecast for 2025 at an average of $100/t, Mining Weekly reports.
BMI analysts expect downward pressure on prices to continue to decline as a result of weak demand caused by the poor outlook for China amid its sluggish real estate sector.
Since the beginning of this year, iron ore prices have averaged $105/t with limited prospects for recovery in the near term.
BMI believes that iron ore prices are likely to remain highly sensitive to potential stimulus announcements from the Chinese authorities. At the same time, market sentiment will be tilted toward expectations of further support due to the projected resumption of trade tensions during Donald Trump’s second presidency.
Thus, the extent of any stimulus will be crucial to whether it can change the situation on the iron ore market.
On the demand side, China’s steel production and hence ore demand is still sluggish, with weakness in the real estate sector adding to the gloomy picture.
The Chinese real estate sector remains a major drag on demand. Overcoming the downturn in this market will require many years of effort, given the scale of unfinished projects and unsold housing stock, BMI notes.
Although China’s iron ore imports remain strong, with a 4.9% year-on-year increase in 10 months of 2024, inventory levels are likely to rise amid expectations of changing demand and lower prices.
BMI notes a significant increase in ore stocks in Chinese ports. As of November 8, they amounted to 149.9 million tons (+31% since the beginning of the year). This could potentially limit prices in the coming months.
Outside of China, steel production and demand for iron ore are still subdued.
At the same time, supply from leading mining companies remains stable, BMI analysts say. Most of them have increased production and supply of this raw material and are going to maintain production levels.
BHP has set its production forecast for the 2025/2026 financial year at 255-265.5 million tons, while Fortescue has maintained its expectations for supplies in the period at 190-200 million tons.
Vale’s 2024 iron ore production forecast has recently been revised upwards to 323-330 million tons, compared to the previously expected 310-320 million tons. Rio Tinto expects raw material supplies this year to be 323-338 million tons.
In the long term, BMI forecasts a drop in iron ore prices from $110/t on average in 2024 to $78/t in 2033.
As GMK Center reported earlier, iron ore prices have fallen by 3% since the beginning of November this year. Weak economic signals from China continue to put pressure on iron ore prices.
