Dutch-headquartered international bank ING has released its monthly report focusing on the outlook of commodities such as iron ore.
The bank stated that iron ore prices declined by more than 20 percent year on year in November this year since the world’s largest iron ore consumer, China, has been experiencing a downturn in its real estate industry, which accounts for about 40 percent of its steel demand. Also, in November, new house construction starts, which is the biggest steel demand driver in China, dropped by more than 20 percent year on year.
Even though the Chinese government has unveiled several stimulus measures for the real estate industry this year, steel demand has not shown any significant improvement, as these measures have focused on reducing property inventories rather than supporting new house construction starts. As a result, the bank believes that the steel demand will continue to be suppressed next year, with the continued weakness in the sector remaining 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. However, the increase in demand in China may not be enough to absorb rising iron ore imports. 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 continue to remain under pressure in 2025 amid expected subdued demand and increased iron ore inventories at Chinese ports. 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 real estate sector will be crucial in supporting demand. The bank predicts that iron ore prices will average $90/mt in the fourth quarter, with a 2025 average of $95/mt.