COMMODITIES OUTLOOK
Iron Ore’s wintery outlook By Tom Price Managing Director, Research Analyst, Resources at Panmure Liberum
supply growth. Any new supply now would probably tilt it into surplus, quickly weighing on prices. Also, this market is particularly vulnerable in Q4. The northern hemisphere’s active Spring-Summer period – for the trade-conversion-deployment of steel in key sectors – is ending. By October, steel mills of Asia-Europe-America start cutting raw materials’ orders (ore, coke, scrap), destocking steel, commencing maintenance work, etc. In fact, compared to other commodity markets – the global iron ore-steel trades can be reasonably described as profoundly seasonal (Fig 2) – a characteristic that significantly influences trade flows and product pricing. Every year, we monitor market behaviour around three turning points: recovery of trade/conversion rates from northern winter’s lows (Dec/Jan); peak/hold of trade/production rates (May); and, the pre-winter destock/shutdown (Oct). More reforms too But wait, there’s even more downside risk here for iron ore prices. For not only is the massive 120 mtpa Simandou operation ramping exports during iron ore’s subdued Q4, China’s government is considering the roll-out of another reform programme for its 1 btpa steel industry. This was flagged at the CCP’s National People’s Congress in March, as a ‘restructuring’ exercise – apparently to clear what it sees as a persistent industry surplus, and to curb China’s ballooning finished exports. But since China’s steel industry has already undergone several reforms over the last 10-15 years – including 2013-16’s Xi-led capacity rationalisation and consolidation – there’s not much real ‘reform’ work to do here. For not only is China’s steel industry operating efficiently, reporting a high, stable utilisation rate – it continually adjusts its average cost base and total output rate, to protect margins. This industry’s never been so lean. It follows that instead of another comprehensive industry reform programme, we’d probably expect a simple cap to industry-wide annual output to be applied – to clear the sticky local surplus and to pare the export-related risk of regional trade conflict. China’s National Development & Reform Commission (NDRC; economic ‘think tank’ and industry reform agency) successfully controlled China’s total steel production rate during 2021-23, with this sort of policy. Of course, if the cap’s applied, it would be an additional drag on iron ore demand and prices. This year, China is on track to import 1,150 mt (-7%YoY) of iron ore (incl. from Africa), 74% of the total seaborne trade (Fig 3).
Fig 1
Fig 2
African snapshot Right now, Africa is not a key player in the US$145bn global iron ore trade. It currently mines 90 mtpa of ore, exporting 60 mtpa of this to Asia and Europe – just 4% of the 1.55 btpa seaborne flow. Its residual mined supply is converted locally to 20-25 mtpa of crude steel. The continent’s current primary iron ore source is South Africa, from the mines of Kumba and Assmang. At year’s end though, Africa’s iron ore exports will include the first shipments from Simandou, Guinea (RIO-Chinalco-WCS, Blocks 1-4). It’s then forecast to ramp up to 120 mtpa by 2028, or 8% of seaborne supply (Fig 1), taking Africa’s total trade contribution to over 12%. State of play But firing up Simandou now is bearish for iron ore’s short-term price outlook. Why? Firstly, seaborne iron ore trade is finely balanced now – between China’s faltering steel demand versus relentless iron ore
10 MODERN MINING www.modernminingmagazine.co.za | NOVEMBER2025
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