Looking back at 2024, domestic demand was weak, supply remained high intensity, and the current price of iron ore was under overall pressure to decline under the loose supply and demand pattern. Domestic and foreign macro policies provided a phased upward driving force.
Review of Mineral Price Trends in 2024
The overall trend of iron ore prices in 2024 can be divided into four stages.
Phase I: In the first quarter of 2024, the optimistic expectations of domestic policies were fulfilled, the black system valuation fell back, the Federal Reserve’s interest rate reduction window was repeatedly delayed, the goals of the National Two Sessions were in line with expectations, the target growth rate of GDP (gross domestic product), the target deficit rate, and the 1 trillion yuan special treasury bond did not exceed market expectations, the terminal demand was weak, the recovery of domestic demand for iron ore was less than expected, combined with the significant year-on-year increase in overseas ore shipments, the domestic ore output grew more than seasonally, and the iron ore valuation was relatively high. Under the negative feedback logic, the iron ore price fell faster and faster than expected.
The second stage: from the beginning of April 2024 to the end of May 2024, the industry “positive feedback”, the supply and demand margin improved, the black series valuation in the first quarter fell significantly, the international inflation expectations began to rise in April, the domestic terminal demand recovered and was higher than expected, under the new balance of steel supply and demand, the spot profit of steel enterprises rebounded significantly, the domestic demand continued to rise, the overseas mine supply declined month on month, the supply and demand margin of iron ore improved, combined with the domestic “May 17″ new real estate policy, the extra long term special treasury bond incremental policy stimulus, the current price of iron ore hit a new stage high.
Phase Three: From May 23, 2024 to September 23, 2024, iron ore showed a pattern of strong supply and weak demand. During the macro policy window period, market transactions exhibited weak reality, and the current price of iron ore peaked and fell temporarily. With the implementation of favorable real estate policies in late May and the expectation of weakened demand margins triggered by crude steel policies, the current price of iron ore continues to fall. With the release of detailed rules for adjusting real estate policies in multiple cities across the country, coupled with the State Council’s issuance of the “2024-2025 Energy Conservation and Carbon Reduction Action Plan” on May 30, strict implementation of steel production capacity replacement, and continued regulation of crude steel production in 2024, the market’s expectation of a marginal decline in demand for iron ore has begun to ferment. From mid July to August 19th, the “export pay” investigation and multiple countries’ anti-dumping policies on exported steel have suppressed the valuation of black series. Traders have concentrated on selling old standard rebar, exacerbating market pessimism. Steel companies’ profits have rapidly shrunk, overseas mines have maintained high supply, port inventory levels have continued to rise, and iron ore prices have continued to decline until September 23rd.
Stage 4: Macro incremental expectations drive stronger, domestic demand supports prices, domestic and foreign policy expectations resonate, and black collectives experience a huge rebound. On September 19th, the Federal Reserve cut interest rates by 50 basis points to start the interest rate reduction cycle, and the overseas economy maintained resilience; On September 24th, the People’s Bank of China, the State Administration for Financial Regulation, and the China Securities Regulatory Commission held a press conference to further launch a series of stimulus policies. The monetary policy was intensive in increments, with the “three arrows” of reserve requirement ratio cuts, interest rate cuts, and interest rate cuts for existing housing loans. The policies met expectations and exceeded expectations, coupled with expectations of iron ore replenishment before the National Day holiday and a rebound in terminal demand after the holiday, leading to a collective upward trend in domestic commodities. With the concentrated realization of macro optimism on October 8th, the prices of black series reached a temporary peak, and the profits of domestic blast furnaces were relatively considerable, which maintained a certain degree of elasticity in iron ore demand. Coupled with the decline in overseas mineral supply in the fourth quarter, the balance of iron ore supply and demand was temporarily tight, supporting prices to remain relatively high.
Outlook for the trend of iron ore market in 2025
The author believes that the pattern of strong supply and weak demand for iron ore in 2025 is difficult to change, and the price center will continue to shift downwards.
In terms of supply, the global increase in iron ore supply by 2025 will be approximately 69 million tons (assuming prices remain above $100/ton). Based on shipping ratios, the total increase in domestic iron ore supply by 2025 is estimated to be approximately 46.9 million tons, including 21.65 million tons from mainstream mines, 15.25 million tons from non mainstream mines, and 10 million tons from domestic mines.
In terms of demand, the demand for foreign iron ore will continue to decline in 2025. With the rapid growth of manufacturing and emerging industries in China, industrial steel is showing a trend of high-end, large-scale, and high growth. Currently, the demand situation is better than the real estate market, and the main drag and risk points are in the export of real estate and manufacturing industries. It is estimated that the domestic demand for iron ore may decline by about 1% by 2025.
In terms of price, the supply and demand of iron ore will continue to be loose in 2025, and the price center will continue to move downwards to $100/ton, with a fluctuation range of $85/ton to $115/ton. The macro policy increment in the first half of the year was relatively concentrated, and the supply increment was more in the second half of the year. The overall price trend tends to be high in the front and low in the back, and the price difference between iron ore months and domestic and foreign markets may be further compressed. If the price approaches the lower edge, it will have a crowding out effect on domestically produced and non mainstream minerals with higher production costs, and there will be an upward driving force for prices.
In summary, the author suggests operating within a certain range, especially for production enterprises with a high volume of locked price orders, to increase their raw material hedging positions in the bottom range and lock in production profits.