It may be a sore point for many investors but iron ore prices are expected to decline gradually over the medium to long term.
Market analysts expect prices of the steelmaking staple and major Australian export to fall from an estimated average of just over US$97 per dry tonne in 2025 to a forecast low of US$80/dmt by 2029.
Following market consultation, Platts, which is part of S&P Global Commodity Insights, proposes updating the baseline quality specifications of its IODEX iron ore benchmark, effective 2 January 2026, “in view of confirmed degradation to the quality of Australian iron ore fines informing the assessment”.
“Under this proposal, the benchmark index would reflect 61% Fe iron ore fines, revised from 62% currently. Platts would also revise silica, alumina, and phosphorus quality specifications to reflect higher impurities,” the global source of benchmark price assessments says.
“The assessment description would be updated from IODEX 62% Fe CFR China to IODEX CFR China. The updated quality specifications would also apply to Platts’ IOPEX port stock assessments and TSI Iron Ore Fines assessment.”
Platts Iron Ore Index, or IODEX, is a benchmark assessment by S&P Global Commodity Insights of the spot price of physical iron ore. The assessment is based on a standard specification of iron ore fines with 62% iron, 2.25% alumina, 4% silica, and 0.09% phosphorus, among other gangue elements.
Steel the one?
The projected iron ore price decline is largely attributable to a projected surplus in global seaborne trade balance, with imports into China poised to suffer significant volatility.
S&P Global anticipates a notable drop of 45.8 million tonnes in 2025, reducing imports to 1.192 billion tonnes – marking the first decline since 2022. This is primarily driven by an expected reduction in China’s steel production.
“However, by 2029, we expect a rebound in imports, reaching a projected peak of (1.254 billion tonnes) as domestic iron ore production declines. Looking ahead to 2035, imports are forecast to dip again to (1.194 billion tonnes), influenced by the persistent decline in China’s steel output, which will continue to suppress iron ore demand,” S&P Global reports.
A tonne of the benchmark iron ore product was US$92.40 a tonne in June after trading above US$100 during the middle of May.
As mentioned, the steelmaking commodity’s value is now heading towards a sustained sub-US$90 price for the first time since November 2022. Iron ore dipped below US$90/t in September but quickly rebounded.
Despite the short-term volatility being a sore point for producers and their investors, junior exploration companies vying to bring the next generation of iron ore mines online remain cautiously optimistic.
Strengthening balance sheets
The series of capital raises amongst some minnows during Q2 2025 might also signal that their investors hold a similar positive view of the outlook.
Hawsons Iron (ASX:HIO) in June began raising up to $1 million through a share purchase plan after receiving interest from an investment fund to purchase shares to expedite activities at its Hawsons Iron Project, as reported by this news service.
Speaking to Mining.com.au, CEO Tom Revy says the interest from the undisclosed investment fund is indicative not only of the long-term positive outlook for iron ore, but of the interest in high-grade (68%+ Fe) ore.
“As of mid-2025, the iron ore market is experiencing a complex interplay of supply dynamics, demand fluctuations, and geopolitical (tensions) factors, all of which are influencing current prices and shaping future prospects,” Revy tells this news service.
“As of mid-2025, the iron ore market is experiencing a complex interplay of supply dynamics, demand fluctuations, and geopolitical (tensions) factors, all of which are influencing current prices and shaping future prospects”
“On top of this, major governments have committed to greenhouse gas reduction targets and one of the largest emitters is the steel industry and yet the world can’t live without this relatively inexpensive and irreplaceable product.
“Currently, global iron ore majors like Vale, Hancock Magnetite Holdings, Fortescue Metals Group (ASX:FMG) and CITIC Pacific Mining are all currently involved in the operation and/or development of magnetite projects – they understand the opportunity better than most.
“The world is chasing Hawsons high-grade (68%+ Fe) material”.
In May, Burley Minerals’ (ASX:BUR) entitlement offer closed “significantly oversubscribed”, raising $563,891. Burley appointed Yelverton Capital as lead manager to the placement, which raised $1.1 million, as well as the entitlement offer.
The offer closed on 9 May having initially raised $335,955. Shareholders were then offered the opportunity to apply for additional new shares in excess of their entitlement. The shortfall offer was strongly supported by existing shareholders, raising an additional $227,936.
Other iron ore minnows to rattle the tin in Q2 2025 include Genmin (ASX:GEN) and Tempest Minerals (ASX:TEM).
Iron grip
Burley Minerals Managing Director Stewart McCallion remains bullish, previously telling Mining.com.au he believes there are some ‘very good opportunities’ for companies with strong balance sheets and cash flows.
McCallion says the Pilbara will continue to be the best location for iron ore mining for a generation and majors are considering replenishing their diminishing reserves, meaning conditions are conducive for M&A.
As the steel industry faces increasing pressure to cut carbon emissions, the use of high-grade iron ore presents a viable solution to aid in decarbonisation.
Consequently, S&P Global expects the premium for high-grade iron ore (65% Fe) to increase in the long run. The DRI process, which employs natural gas and, more recently, hydrogen instead of coal, provides a cleaner alternative to the conventional BF-based steelmaking method, helping to lower emissions and promote decarbonisation initiatives.
Hawsons’ Revy agrees, noting one of the key components necessary for the global shift to “green steel” is the production of high-grade iron ore feed, for direct reduction iron processing.
“DR-grade iron ore (67%+ Fe) currently makes up only about 4% of global iron ore supply, highlighting the real opportunity for returns to Hawsons’ shareholders,” the CEO tells this news service.
“Long-term estimates for Hawsons grade product are likely to attract in excess of 30% above the iron ore 62% price.
“The board of Hawsons is committed to delivering the project in line with International Finance Corporation performance standards on environmental and social sustainability.”
Research firm CRU estimates there are more than 80 DRI projects in the pipeline adding almost 200 million tonnes of DRI capacity over the next 15 years.
“There is an incredible potential increase in the production pipeline from major steel producers worldwide with implications for capital and feedstock required. In addition, steelmaking capacity is expected to grow significantly in developing regions,” CRU reports.
Significant seaborne surpluses
Global steel production was weak in 2024 and remains below the peak in global output in 2021.
World crude steelmaking capacity exceeded global steel production by over 600 million tonnes in 2024. However, substantial new steel capacity is expected over the outlook period, with large-scale projects in Asia, North America, Europe, and the Middle East.
In 2020, China’s steel production peaked at 1.065 billion tonnes, subsequently declining to just over 1 billion tonnes in 2024. It is expected to fall below 900 million tonnes per year by 2035.
S&P Global says oversupply remains a feature of the country’s steel market, negatively affecting profitability.
“Steel demand is subdued by a protracted slowdown in the domestic property sector, while rising trade tensions from US-China tariffs and the recent antidumping measures imposed by India and Southeast Asian countries are anticipated to restrict China’s steel exports,” S&P Global reports.
S&P Global expects significant seaborne iron ore trade surpluses to emerge from 2026. The global analytics firm anticipates shipments from Australia – the world’s largest iron ore exporter – will rise from an estimated 905 million tonnes in 2025 to 917Mt by 2029.
However, this increase is poised to be short-lived, with shipments projected to drop back to 905Mt by 2035 due to mine depletion and declining ore grades.
Rio Tinto (ASX:RIO) has reportedly informed customers that its flagship blended product will likely have a lower iron content in the future due to these challenges.
In light of these developments, Platts in Q2 2025 initiated a formal market consultation, which ran until 30 May. This consultation discussed the aforementioned adjustments to the specifications of the 62% Fe IODEX price benchmark, considering the quality deterioration in Western Australian iron ore fines.
Green light
CRU outlines how iron ore’s future could rest with the direction of direct reduction iron (DRI) processing. CRU has expertise and services, including consulting services, covering the steel value chain – including DRI.
Steelmaking requires a charge of iron-bearing material, which can be in the form of either ore-based metallics smelted from iron ore or recycled steel scrap. DRI is an ore-based metallic mainly consumed in an EAF for carbon steelmaking.
Ore-based metallics consumption in EAF steelmaking is used to dilute impurities present in the scrap charge. DRI is produced through the direct reduction of iron ore pellets (removal of oxygen) into metallic iron by natural gas, but coal and hydrogen can also be used.
Significantly, steel made with DRI has a lower carbon footprint in comparison to conventional steelmaking that uses hot metal produced via a blast furnace. Hence its ‘green iron’ moniker.
DRI can be consumed directly in steelmaking or may be briquetted into hot-briquetted iron (HBI) when being transported over long distances for steelmaking to avoid the shipping problems associated with DRI. For this reason, DRI and HBI are similar, with the terms frequently used interchangeably.
The production of DRI is geographically concentrated, largely driven by the availability of affordable natural gas, which is a major factor in determining competitiveness.
As CRU notes, DRI has been around for decades but interest has grown significantly due to its lower carbon footprint.
Ironclad investment
Germany, which is Europe’s top steel producer, believes it is pivotal to pursue decarbonising the sector through electrification and the use of green hydrogen in direct iron reduction.
Low-carbon steel plants in the country are on track to tap into a national hydrogen pipeline system, displacing coal and gas feedstocks and cutting emissions by 28Mt CO2 per tonne of hydrogen used.
German steel company Stahlwerk Thüringen and gas network operator Ferngas Netzgesellschaft are partnering to connect a German steel plant in the state of Thuringia to Germany’s planned hydrogen network in 2027.
The companies say connecting to the hydrogen network will preserve competitiveness and strengthen Stahlwerk Thüringen as a hub for low-emission green steel production.
Meanwhile, the Australian Government in Q2 2025 announced almost $20 million in investment to bolster the green metals sector with a grant to develop the production of low-emissions iron using Pilbara iron ore in Kwinana, Western Australia.
The $19.8 million funding supports a $48.8 million front-end engineering design (FEED) study for the NeoSmelt project, which is seeking to replace the traditional blast furnace steelmaking route by developing an electric smelting furnace to make low-emissions iron.
NeoSmelt is a joint venture between BlueScope (ASX:BSL), BHP (ASX:BHP), Rio Tinto, Woodside Energy (ASX:WDS), and Mitsui Iron Ore Development.
The Kwinana facility is on track to become Australia’s largest ironmaking electric smelting furnace pilot plant. The electric smelting furnace, known as ESF, is a technology advance that could reduce emissions by as much as 2 tonnes of carbon dioxide per tonne of steel produced.
The innovation is expected to cut emissions by millions of tonnes of carbon dioxide each year if rolled out Australia-wide.
A final investment decision is due in 2026, with operations at Kwinana planned to begin in 2028, as reported by this news service.
Write to Adam Orlando at Mining.com.au
Images: Mining.com.au, Bluescope, CRU & iStock
