Prospects for iron ore are bearish in 2025 as supplies are expected to be strong and demand for steel weak, analysts have said.

“The outlook for iron ore prices remains soft due to the strong supply outlook and weaker steel demand. Australia and Brazil, the world’s two largest producers, are expected to continue to collectively grow export volumes by 1.9 per cent annually over the outlook period to 2026,” said Australia’s Office of the Chief Economist (AOCE). 

“Iron ore prices are expected to face downward pressure due to weakness in Chinese demand and the potential for steeper trade protectionist measures, capping the demand for iron ore,” said research agency BMI, a unit of Fitch Solutions.

Chinese tug of war

“We expect iron ore prices to remain under pressure in 2025 amid a combination of a bearish demand outlook for steel, ongoing strong shipments and elevated port inventories of iron ore,” said ING Think, the economic and financial analysis wing of Dutch multinational financial services firm ING.

But BMI said global average steel prices will likely remain in a tug of war between lower Chinese prices suffering from weaker demand. At the same time, the US market could receive support from protectionist measures, resulting in a neutral to slightly bullish global outlook. 

Iron ore prices with 62 per cent iron content are currently ruling around $100 a tonne — a three-month low. Disappointing economic data from China, the largest iron ore consumer in the world, have dampened the outlook for demand. 

Major Australian miners have ramped up greenfield projects, while Brazilian producers such as Vale and CSN are on an expansion spree. New supply from emerging producers in Africa will also contribute to global supply, said AOCE.

Boost for Chinese property sector

ING Think said China will continue to drive iron ore prices going forward, and the supply and demand balance will largely depend on the country’s steel demand outlook.

“ A further boost for China’s property sector will be crucial in supporting demand,” it said.

BMI concurred with ING Think’s view. It said the commodity will receive much-awaited support if the Chinese property sector turnaround momentum appears stronger than “our current expectations” in the wake of a possibly larger stimulus support package announcement in 2025.

The AOCE said rising steel demand and production capacity in emerging Asia and the Middle East will lift iron ore demand over the outlook period. 

The increase in demand includes over 100 million tonnes of integrated (Blast Furnace-Basic Oxygen Furnace) steelmaking capacity expected to come online in the next few years in Asia. 

“Over the next two years, iron ore demand is expected to receive support from a modest rise in demand in Europe and North America as interest rates continue to fall,” said the AOCE. 

Price outlook

ING Think said iron prices could be stronger in the first quarter, supported by restocking ahead of the Lunar New Year holiday in late January – although the support might be limited given the already high existing inventories in China. 

“Prices will trend down from there to average $90 in the fourth quarter. We see a 2025 average of $95/t,” it said.

AOCE said from an estimated average price of around$92 a tonne (free-on-board) in 2024, the benchmark iron ore price is now projected to fall to an average of $80 a tonne in 2025. It will then decline further to around $76 a tonne in 2026, it said.  

With the supply side largely stable, it will be demand in China will continue driving iron ore prices going forward, ING Think said.