Analysts See Iron Ore Below $100, Weak Chinese Demand - BHP Group (NYSE:BHP), FORTESCUE LTD by FORTESCUE

Iron ore prices could remain subdued in the near future. Citi analysts see them hovering around $85 per ton by 2026, owing to incremental new supplies, rising inventories, and weak Chinese demand.

“Not only has China's recent stimulus package fallen short of investor expectations, but the weekend's fresh disappointments from the inflation report and FDI data have also reinforced the view that China is still far from stabilizing its beleaguered economy,” said Hebe Chen, market analyst at IG, per News.com.au.

The property sector remains a significant drag on demand, with real estate investments falling by 10.1% year-on-year and new construction starts contracting by 22.2% over the same period. These challenges, coupled with growing iron ore inventories at Chinese ports — up 31% this year to nearly 150 million tons — paint the impact of a supply-demand imbalance pressuring prices. In 2025, BMI research sees iron ore averaging $100 per ton.

Geopolitical factors weigh the sentiment as Donald Trump's upcoming second term raises trade tensions. Analysts warn that rekindled tariffs could further dampen Chinese steel demand, creating additional headwinds for iron ore.

Finding itself between a rock and a hard place, as an important U.S. ally whose largest trading partner is China, uncertainty is pressuring the Australian mining sector. BHP Group Ltd (NYSE:BHP) stock is down 20% year-to-date despite a strong recovery in September, as the market showed limited confidence in Beijing's ability to address those issues effectively.

Still, major iron ore producers, including BHP, Rio Tinto (NYSE:RIO), Vale (NYSE:VALE), and Fortescue (OTC:FSUMF), have maintained strong production levels.

BHP achieved a record output of 260 million tons in the fiscal year ending June 2024, with guidance of 255 to 265 million tons for 2025. Rio Tinto shipped 332 million tons in 2023, projecting 323 to 338 million tons in 2024. Vale increased its guidance to 323–330 million tons for 2024, while Fortescue shipped 191.6 million tons in the 2024 fiscal year and expects similar levels this year.

Simandou, the long-delayed Guinean iron ore project, is also expected to come online soon, adding significant new supply. Furthermore, global trends toward low-carbon steel production are reducing demand for high-grade iron ore, particularly in regions like the EU, where initiatives such as the Carbon Border Adjustment Mechanism are accelerating the shift to greener methods.

Photo: BJP7Images via Shutterstock

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