KUALA LUMPUR (Nov 18): Iron ore prices are projected to remain under pressure, with a forecast average of US$100 per tonne for 2025, according to BMI, a Fitch solutions company.

This subdued outlook is attributed to sluggish demand from China’s property sector despite recent stimulus efforts.

BMI noted that iron ore prices will likely remain volatile, heavily influenced by potential stimulus announcements.

"Market sentiment is skewed towards expectations of further support, especially as rekindled trade tensions under a potential second Trump presidency loom," it said.  

BMI noted that iron ore prices at Qingdao Port stood at US$ 95.70 per tonne as of November 8, and have struggled to regain momentum after briefly climbing to US$103 per tonne in late September following stimulus announcements from Beijing.

Year to date, iron ore prices have averaged US$105 per tonne, with limited recovery prospects in the near term.

China’s property sector remains a major drag on demand with real estate investment falling by 10.1% year-on-year in the first nine months of 2024, while new construction starts contracted by 22.2%.

“Addressing the property market downturn will be a multi-year effort, given the scale of unfinished projects and unsold housing stock,” BMI noted.  

According to the World Steel Association, Chinese crude steel production also declined 3.6% year-on-year during the same period, with production in September falling by 6.1% y-o-y, underscoring the sector's woes.  

At the same time, rising inventories in Chinese ports are capping price recovery in the coming months. Iron ore stockpiles rose by 31% year to date, reaching 149.9 million tonnes as of the first week of November.

Outside China, global crude steel production fell by 1.9% year-on-year in the first nine months of 2024. While countries like India and Germany reported modest gains, declines in major producers like Japan and the US offset global growth.

On the supply side, major miners such as BHP, Rio Tinto, and Vale have all reported healthy production figures.

Looking beyond 2025, BMI forecasts a gradual price decline, with iron ore prices expected to average US$78 per tonne by 2033. This reflects the cooling demand growth in China as the country shifts its economic focus towards less steel-intensive industries.

Additionally, the global transition toward green steel production is expected to weigh on iron ore demand. Unlike traditional blast furnace methods that rely heavily on iron ore and coking coal that are highly polluting, green steel technologies require much less iron ore and is produced at electric arc furnaces.

BMI flagged further downside risks if China’s economic recovery falters but noted that supply disruptions from unforeseen weather events like La Nina as well as labour and energy issues could temporarily support prices.