In a surprising turnaround, the iron ore market concluded 2025 on a positive note, defying widespread earlier pessimism about a supply glut and weak Chinese demand. Key futures contracts posted annual gains, with the most-traded contract on China’s Dalian Commodity Exchange (DCE) rising 1.3% and the benchmark contract on the Singapore Exchange climbing 5.1%.
This unexpected strength was fueled primarily by resilient demand from China, the world’s top consumer, and record-breaking steel exports. While the domestic property sector remained sluggish, robust export volumes effectively filled the demand gap. Furthermore, cost-competitive blast furnace-based steel mills maintained high operating rates, sustaining their consumption of iron ore and providing additional price support.
However, this optimism may be short-lived. Research unit BMI has issued a forecast sounding the alarm for 2026, projecting the average iron ore price to decline to $95 per tonne from $97 in 2025, marking the start of a moderate downtrend.
This anticipated shift is rooted in fundamental changes to market dynamics:
In the near term, restocking activity by mills ahead of the Lunar New Year in early 2026 may offer some price support. Yet, swelling port inventories and tepid end-user demand are expected to cap any significant rebound.
Looking further ahead, BMI paints a more severe picture for the coming decade. It forecasts a continued structural decline, with the average price potentially falling to $78 per tonne by 2034. This prolonged downtrend is driven by the approaching peak in China’s steel consumption and a definitive move away from steel-intensive growth models in its economy.
The price path remains subject to variables. A stronger-than-expected recovery in China’s property sector or major supply disruptions in key producing regions like Australia or Brazil could provide upward momentum. Conversely, a further weakening of China’s economic activity could lead to steeper declines than currently projected.
In summary, while the iron ore market staged an unexpected rally in 2025 on the back of export resilience, 2026 is shaping up to be a pivotal year of transition. The market appears set for a shift in its price cycle, prompted by a fundamental realignment of supply and demand, and participants should prepare for an impending downward adjustment.
