Iron Ore Defies Tariff Turbulence, But for How Long?
In this season of tariffs and counter-tariffs, the price of one of the most essential raw steelmaking materials seems to be holding up for now. The iron ore price has so far proved mostly immune to the fluctuations. But the question on everyone’s minds is, for how long?
Despite the shadow of tit-for-tat customs duties, iron seems to be riding the storm quite well compared to other commodities, raw materials and metals. In fact, futures prices on some exchanges actually inched up recently despite the looming clouds of tariffs.
One report said the small rebound in ore prices showed the potential for growth even in these trying times. Still, other steel raw materials were sending out mixed results, indicating an otherwise cautious market. May futures were down for now, but the drop has not been precipitous.
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Some Analysts See Potential for More Upward Movement
It is still too early in the month to predict how the tariffs will eventually affect iron ore supply chain and markets with any degree of certainty. As far as April goes, some analysts say prices may remain steady or even strong because of the continued demand for imported ore from China.
Another report quoting ANZ analysts said ore demand could remain on the upswing at least through April. The analysts cite a slight uptick in Chinese steel consumption despite a slowdown in real estate markets, which they feel could spur steelmakers.
Regardless of the short-term outlook, nobody seems willing to forecast the impact of tariffs even as soon as next quarter. This hesitation mainly stems from the flurry of retaliatory trade news coming out of the U.S. and China.
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China Holds Out Hope
As has been the norm these last few years, some experts hope that China can continue to prop up iron ore prices. One reason for this is its rapid factory expansion. People like BHP Chief Commercial Officer Rag Udd predict steel makers in China have the power to sustain the present-day steel production rate for many years more. Udd has even predicted that ore prices would remain above US $80 a ton for some time, due to the demand for steel from new sectors.
Incidentally, over 60% of BHP’s revenues came out of China last year, as Chinese steelmakers picked up most of the iron ore the company mined in Western Australia’s Pilbara region.
Udd and many others also believe that investors were mistaken to focus only on the downturns in the Chinese real estate market and failed to recognize the strong growth in steel demand from other sectors. This includes electric vehicle manufacturers. These analysts feel that resilience and capacity to sustain themselves even in adverse conditions may hold the Chinese markets steady for years to come.
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Iron Ore Prices Continue To Brave The Stormy Weather
Iron ore has been the frontrunner in the profit-making race for at least five global mining companies: BHP, Rio Tinto, Fortescue, Vale and Anglo American. Prices have indeed dropped by about 6% in the last few days, from US $103 per ton to about $96 per ton. However, reports point out that this fall was not very dramatic when compared to the 15-18% a ton drops seen with copper and oil.
While BHP and Fortescue share prices have recouped part of their recent losses, analysts believe that only a worsening trade war between China and the U.S. could force China to cut its steel production. Such an event would put pressure on raw materials like iron ore and coking coal.
Australia to Face Iron Ore Competition from Guinea
Australia and Brazil are two of the largest iron ore exporters. As per Australia’s Department of Industry, the country could export about US $117 billion worth of iron ore until June this year. Current forecasts have iron ore prices averaging out to about US $85 per ton in 2025, excluding freight charges.
In total, the country aims to export about 900 MT of ore this year. However, thanks to Guinea, Australia may face competition in this sector next year. This comes as both Rio Tinto and Chinese state-owned companies work to set up new iron ore mines in the Simandou mountains of the West African nation.
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