For Australia's iron ore industry, China's latest attempt to stimulate economic growth cannot develop rapidly as steel miners are shocked by the price of steel-made minerals that are close to six-year lows.
The price of iron ore traded on the Singapore Exchange has fallen 7% to $100.15 per ton (shortly down below $100 on Monday), and now it is down 28% at this time last year.
Iron ore is imported in Suzhou, China. (VCG/VCG photos via Getty Images)
The decline in iron ore prices was the main factor in the decline of Fortescue metals' shares in the past month, compared with the stock price earlier today at $15.91.
Mineral Resources, another second-year ore producer, has also been hit by management instability, with shares down 40% in the past month and 67% in the past 12 months.
The larger miners that produce high-grade ore, including BHP and Rio, have also suffered no big hits, as revenue protections have also been unstripped in the production of copper, coal and aluminum, including other commodities.
Tariffs begin to bite people
Fortescue and mineral resources are fully exposed to weak iron prices, a function of slowing Chinese steel production due to faltering domestic demand and tightening export markets, especially the high (and rising) tariffs on Chinese goods on U.S.
Investors have been alert to miners, producing materials on a benchmark of 62% iron content and adopting huge discounts, which can be amplified by quality issues such as impurities in ores.
Iron ore on railway vans at the Saldaha Bay terminal in South Africa. (Photography: Education … [+]
The plan revealed at the National People's Congress (NPC) meeting held this week raises hopes of meaningful stimulus for China's economy, a rubber stamp parliament that is discussing the increase in funding of local governments for infrastructure projects that often have high steel content.
But as the tariff exchange for selling points to a broader, deeper trade war, the steps China takes in the domestic sector will be eliminated in the export market.
In the 2025 metal price outlook, the Institute of Financial Markets’ Institute’s Standard & Poor Gobal said iron ore prices “are that the people who are stumbled in China and increase supply will continue to decline.”
Compared with 2024, China's iron ore imports are expected to fall by 35 million tons this year. New mines (such as Simandou, Guinea, existing advanced mines) are likely to happen and increase production of advanced mines, increasing pressure on second-tier operators.
Iron ore price lows
S&P said iron ore faces a structural downturn with prices at ore, which contains 62% of iron forecasts to average $98 per ton this year, down 6 years.
“While the fiscal expansion issued by Beijing may temporarily benefit from infrastructure and manufacturing, it will often consume the steel sector, the impact on the continued slow recovery of the domestic property sector is likely to be short-lived and not enough to relieve the pressure on iron or price downward pressure on iron or price,” S&P said.
“We expect higher mineral production in Australia and Brazil, as well as a potential start-up in Guinea’s Simandou Project, Greenfield’s largest premium iron ore project.
“This is expected to shift the global ocean trade balance to surplus by 2025, thus putting downward pressure on iron ore prices.”
