Where next for the iron ore price in 2024?

Iron Ore exports are the largest export from Australia, with exports expected to reach $113.4 billion in 2024 according to IBIS World research.

Through 2023, iron ore held the key $100/tonne mark for most of the year, and then peaked at over $140/tonne earlier this month. However, recent concerns over China’s property sector, which accounts for circa 30-40% of the country’s GDP, have dented iron ore thus far in 2024.

Where next?

Iron ore price: Chinese demand

Iron is currently sliding as China has gone against market expectations by keeping its medium term interest rate steady, with signs of weakness in its currency limiting potential monetary loosening.

This will continue to restrict Chinese growth at a moment when the markets had factored in a cut — even though the country’s housing ministry and financial regulator have asked local governments to better coordinate with institutions to provide economic support to real estate projects.

Iron ore prices are primarily determined by Chinese demand; and in 2023, imports rose by 6.6% to a record 1.18 billion tons. This may be surprising to investors used to negative headlines on Chinese economic growth — but the residential property sector also increased by 5.4% last year, and Chinese steel exports are also rising.

Of course, this performance is weaker than in years past, but the country was also dealing with the pandemic fallout during 2023.

On the other hand, iron ore stockpiles in China have risen for six months in a row, and prices are now tumbling both on economic fears and heightened political tensions in the wake of elections in Taiwan, which has elected a President regarded by Beijing as a separatist and a ‘troublemaker through and through.’

The next dataset to watch will be China’s December industrial production data later this week, which analysts expect to be relatively weak. For context, consumer prices in China fell for a third month in a row in December, alongside factory-gate prices. However, this does mean that many analysts still expect China to cut its medium-term lending facility over the next few months as the country faces persistent deflationary pressures.

ASX corporate activity

Encouragingly, Rio Tinto has maintained its production guidance for 2024, noting that commodity prices ‘found some support’ last quarter as global recession fears receded amid falling inflation. The major expects a ‘gradual’ Chinese recovery, though expects it to be weighted towards the second half of the calendar year.

Rio argues that global supply chain bottlenecks are now subsiding but has also highlighted that increasing labour costs may weigh on profitability. However, it notes that Pilbara operations will generate between 323 and 338mt of iron ore this year, with iron ore shipments having increased by 3% to 331.8 Mt last year.

It’s worth noting that both Rio Tinto and Fortescue hit record highs — while BHP Group also hit a two-year high of just above AU$50 ¬– earlier this year.

Conversely, First Quantum has now stopped mining at the Ravensthorpe nickel and cobalt mine due to falling nickel prices, following the same path as Panoramic Resources. A couple of weeks ago, Core Lithium — the only lithium producer in the Northern Territory — scaled back lithium production due to falling prices.

While iron is not directly affected, these mines are pausing production as other commodity prices slide due to demand imbalances and could signal weakness in the wider commodity markets.

In the end analysis, iron may be sliding now, but currently stands at circa $130/tonne, up by $30/tonne since August. This is still significantly below the 2021 peak — but Goldman Sachs analysts think it will average only $117/tonne in 2024.

However, the metal has a history of unpredictable price movements.

Past performance is not an indicator of future returns.

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