The price of iron ore is expected to relapse to $100 per ton again by the end of this year, before falling further to reach $85 per ton in 2025, in light of the worsening Chinese housing market crisis, according to estimates by Capital Economics.
Declining steel production and combating emissions from highly polluting ore blast furnaces could cause Chinese demand for iron ore to shrink by 1% in 2024, and 2% in subsequent years, the London-based research firm said in a note on Tuesday. This coincides with the plans of major mining companies to increase production, which will lead to a glut in supply and greater pressure on prices.
Capital Economics added that demand growth elsewhere in the world is unlikely to absorb enough surplus supplies, given China’s nearly 70% share of the global market.
The price of iron ore has seen a weak recovery this month, after falling below $100 per ton due to disappointing demand in China. Crude futures contracts were last traded at $111.10 per ton on the Singapore Stock Exchange, which represents a 1.1% increase on the day, but is still more than 20% lower than prices at the beginning of the year.
