Market consensus is that iron ore prices will remain soft in the outlook period to 2026. The degree to which it falls and ultimately stabilises varies across the board.
The Department of Industry, Science and Resources’ latest issue of its Resources and Energy Quarterly (December 2024) forecasts lower prices over the outlook period will in turn reduce Australia’s export earnings for the steelmaking ingredient by more than $30 billion to $107 billion in 2024–25 before easing to $99 billion in 2025–26.
DISR and the Office of the Chief Economist each expect the outlook to remain soft due to a strong supply outlook and weaker steel demand. From an estimated average price of around US$92 a tonne (FOB) in 2024, they expect benchmark price to average US$80 in 2025, before declining further to US$76 in 2026.
Many analysts are bearish in 2025 despite the price recently rebounding. In mid-January, the price of the steelmaking ingredient rose above US$100 per tonne on the back of data showing China’s annual imports reached a record and its trade surplus rocketed.
ING International Bank agrees iron ore prices will remain under pressure this year, although its price predictions are higher than most, forecasting a US$100 average in Q1 2025 and US$95 for the year ahead. NAB is not as bullish predicting US$87 although Commonwealth Bank flags a potential US$80 per tonne price on the back of weakening Chinese demand.
That’s quite a variation.
Pilbara and price
Westpac is bearish and forecasts iron ore prices could collapse as much as 30% when mining giant Rio Tinto (ASX:RIO) brings online two mines in 2025 — Western Range in the Pilbara and Simandou in West Africa. Simandou is slated to start exporting from early 2026. Westpac analysts fear the move could drive the market down further and into a major glut.
The Pilbara region in Western Australia has been the dominant iron ore producing region, largely targeting hematite, which is typically higher-grade in the ground than magnetite ore (about 60% contained iron) and less expensive to mine. Magnetite ore grades tend to be lower and such mines are often capital intensive.
Burley Minerals (ASX:BUR) is targeting another type of ore in the Pilbara – channel iron deposits (CID). As an emerging junior iron ore minnow, Managing Director Stewart McCallion is bullish and does not share the same perspective as the Treasurer’s price outlook, which he believes is ‘overly conservative’.
“But I think we should expect the price to fall below US$100/tonne,” McCallion tells Mining.com.au.
“However, I do not have a clear view on what to expect from Chinese demand, so I am taking some liberties here. And it is difficult to predict what will ensue if/when Trump’s tariff policies eventuate.”
McCallion flags Chinese demand, US tariffs, and the state of geopolitics in general to be the main factors affecting the sector and these factors could be the catalysts for a resurgence in 2025. While China has touted increasing economic stimulus efforts to bolster its ailing economy, the effects of US President Dobald Trump’s impending tariff hikes could throw a spanner in the works.
“A resurgence (in price) is dependent on Chinese fiscal policy, and potentially if the US moves to fix its aging infrastructure,” McCallion tells this news service.
While there was some volatility for the most part the iron ore sector performed well in 2024 which he notes has set Burley up for exploration success this year.
“The iron ore (62% Fe Fines CFR) price above US$100/tonne supported strong margins for the majors but also secured profits for the smaller producers. This provided opportunities to reduce debt, pay dividends but also maintained pressure to control costs,” McCallion explains.
In the December quarter, daily benchmark iron ore spot prices (basis 62% Fe fines CFR Qingdao) surged by around 20% to about US$105 a tonne in October following the policy measures announced by the Chinese government, DISR’s quarterly report notes.
Prices subsequently moderated as markets remained cautious about such measures and changed little following the additional measures announced in November. Over the past 12 months, iron ore prices have risen and fallen in line with market speculation of further policy announcements in China, a pattern DISR says is likely to continue – at least until early 2025.
Steel reliant on China
Burley is all steam ahead despite the subdued predictions and will start an aggressive exploration plan this year aimed at delivering a resource for the project, which sits about 90km from Onslow and the Port of Ashburton, along the western margin of the Hamersley Basin.
Burley’s Cane Bore Iron Project is in the thick of the iron ore action and spans 222km2 of the Pilbara region near majors including Mineral Resources (ASX:MIN) and Rio Tinto (ASX:RIO). Burley has identified nearly 1,500 hectares of potential CID resource within the exploration licence area.
“We are planning heritage surveys at Cane Bore in the first quarter, which will be followed by the maiden drilling program. All going well, we will compile a Scoping Study and move to the next phase of drilling. We are anticipating a busy year,” McCallion tells this news service.
“Discovery (and development) of good resources is challenging at the best of times. We recognise (Burley Minerals) competes for a limited amount of money from exploration-focused investors, so it is important to be focused on clearly defined targets. I think Burley is well set up for exploration success in 2025.”
McCallion notes that the market will rebound and more iron ore mines will need to come online with China’s appetite for Australia’s iron ore to return.
China has a huge influence on the state of the sector in Australia. It is the largest consumer of iron ore and brought in a record 1.24 billion tonnes in 2024. At the same time, China’s increasing imports has caused stockpiles to accumulate, with port-side stocks at 14.66 million tonnes as of 10 January, up from 12Mt in the same period last year.
China’s appetite for Australia’s iron ore comes predominantly from its property sector and accounts for around 30% of the country’s steel demand. Yet its the country’s property sector — which accounts for around 30% of China’s steel demand — remains a key cause of weak steel demand in the nation.
Compounding this, global steel production was relatively weak last year, falling noticeably in H2 2024. In the nine months to September global production was 1.391 billion tonnes – 1.6% or 23Mt below the corresponding period in 2023.
The World Steel Association in October downgraded its short-term steel demand outlook for most major economies, flagging the persistent weakness in global manufacturing, as well as lingering global economic headwinds.
DISR reports world steel demand was on track to fall by 0.8% in 2024 – the third consecutive yearly decline. However, global demand is likely to grow by 1.3% a year over the outlook period to 2026.
Similarly, the Office of the Chief Economist forecasts global steel production to gradually recover over the next two years, up 0.9% in 2025 and 1.3% in 2026. However, as mentioned weakness in the Chinese property sector is poised to continue, offset by potential investments across infrastructure and manufacturing sectors.
Although China’s residential property sector has yet to recover, DISR notes the effects of looser monetary policies in advanced economies should see Western steel demand recover gradually in 2025.
Global steel production outside China has been flat over 2024, increasing by a modest 0.4% in the year to September 2024. India continues to lead steel production growth, increasing by 5.9% in the year to September 2024. Substantial production capacity is expected to be added through to the end of the decade, with the Australian Government aiming to increase steel capacity from around 150Mt in 2024 to 300Mt by 2030.
Road ahead
In a December interview with Mining.com.au, CEO of emerging producer Hawsons Iron (ASX:HIO) Tom Revy spruiked Australia’s green steel as a must if the country is to continue reaping in the billions of dollars its iron ore and coal industries generate each year.
Australia is the number one exporter, accounting for 56% of the market, with iron ore generating $138 billion each year of export revenue — about a third of total resource export revenues.
A Climate Energy Finance report notes failure to pivot to green iron risks halving Australia’s export revenues, as major customers like China decarbonise and restructure iron and steel supply chains.
The Hawsons Iron Project is located near Broken Hill in New South Wales in the Braemer Iron Formation, which stretches for several kilometres from South Australia into New South Wales.
Revy explains that magnetite ores from this region are notably materially softer than magnetite ores from regions like the Pilbara, enabling grinding to a finer grain size with significantly less power requirements.
The steelmaking commodity seems to currently have no scarcity, however iron ore remains one of the largest earners for Australia, though lower prices will see export earnings fall. DISR forecasts Australian resource and energy export earnings to decline 10% to $372 billion in 2024-25, down from $415 billion in 2023-24.
However, the earnings falls of the past two years are poised to lessen in 2025-26 — with exports forecast at $351 billion. Australia and Brazil – the world’s two largest producers – are projected to collectively continue growing export volumes by 1.9% annually over the outlook period to 2026.
Write to Adam Orlando at Mining.com.au
Images: iStock
