While the price of iron ore has this week recouped some of its losses to cross back above the US$100 ($147)-a-tonne mark, industry chatter appears to be that the rise will be short lived.
Chinese stockpiles are being sold down, which has buoyed the price in the short term, though more broadly steel output in China is declining as lower prices impact the bottom line of steel mills, production plateaus, and scrap recycling increases.
China’s steel production dropped 9% in July 2024 to 82.9 million tonnes compared to July last year, according to data from the World Steel Association.
The China Iron and Steel Association, meanwhile, predicts this will drop by a further 16% this month.
The spot iron ore price has dropped over 30% from US$144 a tonne in early January 2024, to this week’s shift to just over US$100 a tonne.
BHP said in releasing its results yesterday (27 August) that it expects Chinese blast furnace run-rates to ease in CY24, under pressure from subdued steel margins and the potential for policy-driven production controls.
“For the balance of CY24 and into CY25, we expect supply from low-cost major iron ore producers to grow while iron ore consumption is experiencing a modest decline,” BHP said.
“Our estimate of real-time cost support continues to sit in the US$80 – US$100/t range on a 62% Fe CFR basis.”
Fortescue Metals (ASX:FMG) today reports a strong operating performance for FY24 thanks to iron ore shipments reaching 191.6 million tonnes, which contributed to the third highest earnings period in the company’s history.
The miner expects shipments to increase further to between 190 million tonnes and 200 million tonnes for its Iron Bridge project in FY25.
The Australian Government sees China experiencing modest falls in steel output through to 2026, saying in the June 2024 Resources and Energy Quarterly that this will soften global iron ore demand and place downward pressure on prices.
“A key driver of this downward trend in prices is China’s declining population and the tapering in urban population growth in recent years which is resulting in a structural downshift in demand for new residential and infrastructure-related construction,” the report said.
The Chief Economist predicts the benchmark iron ore price will fall to an average of US$96 a tonne in 2024, then decline further to around US$77 a tonne in 2026.
Citigroup envisages the price will slip to US$85 a tonne within the next three months.
Write to Angela East at Mining.com.au
Images: Stock
