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Iron Ore - General Commentary

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Timothy Moore for AFR electronic 5.25am 04/07/25


Iron ore extended its rally with the price rising back above $US96 a tonne in Singapore trading, a three-month-high.

In a note, Goldman Sachs’ commodities analyst Aurelia Waltham said China iron ore consumption remains at a high level, propped up by resilient steel demand from the manufacturing sector and steel exports.

Still, Waltham said she thinks a ceiling is close.

“While strong demand can support the iron ore price in the $US95-100/t range in the near term, we believe that supply growth caps upside, making a price above $US100/t unsustainable.

“Australian shipments increased by 3 per cent year-over-year in June, alongside higher volumes from Brazil, Canada and South Africa. This has helped to offset supply disruption from Peru following port infrastructure damage.”

Waltham also said: “We forecast the iron ore price to decline to an average of $US90/t in Q4 2025, as strong seaborne supply is met by lower China steel production as steel exports decline. While steel export volumes appear to have held up in June, tariff-related headwinds are compounded by recent comments from the China Iron and Steel Association, calling for export restrictions on steel billet.”
 
If China is going to limit output on steel manufacturing, I can't see the price of iron ore going up in a hurry.

JPMorgan Says China’s Crackdown on Overcapacity May Boost Stocks​

The Chinese government has pledged to rein in supply gluts in the solar, steel and cement industries to address excessive competition and falling prices. Solar glass makers announced that they will cut production by 30% starting in July, while steel mills have received notice to lower emissions and limit output.
 
It’s always will come back to total global steel demand, if total consumption of steel remains the same, iron ore price will probably stay the same.

What I mean is that say China reduces steel output by 5% then Chinas steel exports will be reduced, but if demand overseas stays they same then production around the world will have to rise by a similar amount.

As production in other locations rise it provides support to the iron ore price to offset the reduced demand from China.

The steel raw materials market globally is complex but it’s all interlinked, eg a steel mill in turkey that consumes scrap from breaking ships might not seem like it’s supporting the Pilbara iron ore price, but if it raises production and breaks 5% more ships, that means that it’s consuming scrap that would have competed someplace else with iron ore.
 
It is surplus steel, not the consumption rate sold. They're shrinking overcapacity because the growth of steel consumption isn't keeping up as previously expected. The IOP will most likely remain stagnant and not go up.
China has almost 50% of the world's steel manufacturing tied up.
 
Yes, but that current surplus/ over production is being dumped into export markets. If you remove some China’s exports out of the global system, then other areas production will increase to fill the supply gap. And that is either going to add to iron ore demand either directly if they import of the sea Bourne market, or use up scrap which would have other wise been traded.

I didn’t say it will make iron ore price go up, I am just saying it’s not really going to affect iron ore price over time, the only thing that affects the iron ore price is total global steel usage and total global iron ore production. Everything else is all linked and offsets each other.
 
TimeISmoney said:
The IOP will most likely remain stagnant and not go up.
Click to expand...
there actually is a scenario in which Iron Ore price could rise, and that is if the reduction in steel output from China doesn’t cause them to reduce seaborne imports, instead it causes them to reduce the higher cost production from Chinese mines.

This would cause them to reduce exports of steel to other markets, while still importing the same amount of Iron Ore off the seaborne Iron Ore market.

As other markets increase production to offset the reduced steel supply coming out of China, they will either be buying more iron ore of seaborne markets or consuming more scrap which otherwise would compete with iron ore.

As I was saying to “Ferris market” (iron ore and scrap) is complex and highly interlinked.
 
To be honest, this is probably going to affect Chinese domestic Iron Ore producers more than Australian producers. China is the third largest producer of Iron Ore, but its mines are high cost. And this year it already has been reducing production from its own mines by 10%, a 25 Million tonne reduction.

As I tried to explain above, the Iron Ore industry is complex, but linked, you can’t look at it with 2D goggles.

China reduces iron ore production
 
TimeISmoney said:
If they purposely backed off steel manufacturing, safe to say they have a surplus.
Click to expand...
I don’t see what that has to do with the comment of mine you are replying to.

I already explained in a previous post that China can reduce steel production and it wouldn’t affect the iron ore price as long as over all global demand for steel remained the same, and that it could actually increase the iron ore price if it meant that China reduced their domestic iron ore production to offset the reduced steel production and kept the usage of imported iron ore the same.
 
Hi frog,
Was from a Market Index Article abt 12 mths ago (an FMG Article from memory), dunno who collated it or what parameters it covers, I would say its close to the mark even nowdays, however I will chuck it by say Dec 2026, reckon it could be a bit out of date by then, specially when you add the Thump & China antics into the mix.
All these type of Grids, etc, ususlly have a very short lifespans.
Cheers M8
 
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