The price of iron ore futures rose to a near four-week high on Thursday (16 January), as data showed signs of cooling inflation and growing expectations of Federal Reserve rate cuts weakened the US dollar.
The most actively traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) closed up 1.92 per cent at 797 yuan ($108.71) a tonne, a new high since 18 December 2024. The price of the benchmark February iron ore contract on the Singapore Futures Exchange rose 1.87 per cent to $102.45 a tonne, the highest since 19 December.
Iron ore prices were also lifted by iron ore giant Rio Tinto’s reported annual iron ore shipments, which fell to their lowest in two years as heavy rain in Western Australia impacted December production. Meanwhile, the iron ore market is showing signs that demand could increase in the coming weeks.
Country Garden, once China’s leading domestic property developer, said it is working to revive its business and expects to reduce its annual loss in 2024, also helped boosting overall market sentiment.
Fitch’s research arm BMI said in the fourth quarter of last year that it was maintaining its 2025 iron ore price forecast at an average of $100 a tonne. BMI expects iron ore prices to continue to be hit by a weaker demand outlook unless China takes additional supportive measures in the coming months.
Given that Trump is set to reignite trade tensions in his second US presidency, market sentiment favours expectations of further economic support from China. And the extent of any stimulus will be critical in determining whether the trend in the iron ore market can be reversed.
BMI expects iron ore prices to follow a multi-year downward trend. Slower growth in steel production and increased iron ore output from global producers will continue to keep supply and demand in the iron ore market accommodative.
Analysts believe annual iron ore consumption in China to peak by the end of the 2020s, while demand for iron ore across Asia will continue to grow, but very slowly. Meanwhile, supply constraints at producing mines may help push prices higher.
