Dutch-headquartered international bank ING has released its monthly report focusing on the outlook of commodities such as iron ore.
The bank stated that, so far this year, iron ore has fared worse, with prices declining by about 33 percent since the beginning of the year to below $90/mt for the first time since 2022. The reason behind the downward trend is the ongoing deterioration in the outlook for the biggest buyer, China.
Moreover, the crisis in China’s real estate industry, which accounts for most of the steel demand, does not show any signs of bottoming out, and new house construction starts have fallen sharply this year, continuing to suppress steel demand. As a result, without further stimulus measures, the real estate and construction industries are unlikely to recover in the near-term. The bank believes that the continued weakness in the sector remains the main downside risk to the outlook for iron ore prices.
ING pointed out that iron ore inventories at Chinese ports are back above 150 million mt, standing at a higher level for this time of the year. Also, in the first half of this year, iron ore imports rose by six percent year on year. Therefore, the bank predicts that high iron ore availability in China will continue to put pressure on prices.
Additionally, ING estimates iron ore prices will fall further this year amid subdued demand and sufficient supply. Downside risks are likely to prevail in the near term amid subdued steel demand. China will continue to drive iron ore prices going forward and the supply and demand balance will largely depend on China’s steel demand outlook. A further boost for China’s property sector will be crucial in supporting demand. The bank predicts that prices will average $100/mt in the third quarter, with a fourth quarter average of $95/mt and a 2024 average of $106/mt.
