Downside risks to iron ore pricing are likely to prevail in 2025 after the raw material has been the worst-performing industrial metal this year, with prices down 20% year to date, says ING.
A broad economic slowdown in China and, in particular, the crisis in the property sector have weighed on iron ore. This sector accounts for about 40% of Chinese demand for iron ore. The plentiful property support measures have so far failed to meaningfully impact metals demand.
China’s new home starts – the biggest steel demand driver – have continued to fall, now down more than 20% year-to-date. This should continue to suppress steel demand in 2025. The country's recent stimulus policies have focused on clearing property inventories rather than boosting new starts, ING points out.
China's steel exports have meanwhile hit their highest level since 2016, with volumes up more than 20% so far this year. This is likely to slow moving forward, however, as multiple countries have launched trade cases against Chinese steel, which could further hamper iron ore demand.
“We believe iron ore remains dependent on economic stimulus from China,” ING commodities strategist Ewa Manthey says in a note sent to Kallanish.
“With the recovery path for China still bumpy, the market will remain sensitive to Chinese policies and prices are likely to remain volatile. Until the market sees signs of a sustainable recovery and economic growth in China, we think we'll struggle to see a long-term move higher for iron ore prices.”
Total iron ore production from the top four iron ore producers – Vale, Rio Tinto, BHP and Fortescue – reached 259 million tonnes in the first half of the year, up 1.4% from H1 2023.
Iron ore port holdings in China have continued to rise, back above 150mt and standing at their highest ever for this time of year.
“We expect iron ore prices to remain under pressure in 2025 amid a combination of a bearish demand outlook for steel, ongoing strong shipments and elevated port inventories of iron ore,” Manthey notes.
“We see stronger prices in the first quarter, supported by restocking ahead of the Lunar New Year holiday in late January – although the support might be limited given the already high existing inventories in China,” she adds.
Prices will trend down thereafter to average $90/tonne in Q4 2025. ING sees a 2025 average of $95/t.
Source:Kallanish
