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Global iron ore prices are expected to remain 'rangebound', between USD 80 and USD 100 per tonne, over the period of 12-18 months, weighed down by weaker demand and high supply, Moody's rating said in a recent research note.
On the supply side, the market will witness higher supplies due to increasing output from major iron ore producers for the next two years in new an dexisting mines. Additionally, the report also mentions that new supplies entering the market from frontier regions will contribute to maintaining a high level of global availability. The research note highlights that if prices go below USD 80, major producers will continue to operate profitably because of their low production costs, ensuring steady supply and limiting large price volatility. While high-cost producers will be forced to exit, causing a reduction in supply, at the same time, new supplies from Africa at competitive cost could also lower global prices. China's involvement in African projects, like the Simandou mine in Guinea, which is likely to add around 120 million tonnes annually to global supply, consisting most of higher-grade ore, could significantly alter global trade dynamics. However, on the demand side, continued weakness in global manufacturing activity could be one of the major causes of subdued demand for iron ore in 2025. Adding to that, the report mentions, "real estate construction activity remains subdued in most major markets, weighing on steel demand in key regions such as China, Japan (A1 stable), Korea (Aa2 stable), and the EU (Aaa stable)." According to the note, "structural decline in steel production will negatively impact global iron ore demand, as it imports over two-thirds of global seaborne cargo." This confluence of factors - subdued demand and ample supply - is expected to limit substantial volatility in iron ore prices, preventing significant upward or downward swings. Consequently, major iron ore producers are likely to experience constrained earnings growth in the forecast period. (ANI)
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