Iron ore prices have risen by more than 10% since the beginning of July

After more than three months of calm, the global iron ore market confidently entered a growth trajectory in July. September futures on the Dalian Exchange rose 13.2% since the beginning of the month, exceeding $112/t, while August contracts in Singapore rose 10.6% to nearly $103/t. At the end of the week of July 18-25, the increase was 2.4% and 2.3%, respectively. The main drivers were expectations of government stimulus in China and the announcement of strategic infrastructure projects.

On July 18, the market faced the first wave of caution after the Chinese Ministry of Industry announced its intentions to reform a number of key industries, including steelmaking, with a focus on reducing obsolete capacity. This triggered a short-term correction in the spot and futures markets. However, even against the backdrop of such statements, iron ore remained supported by fundamental factors: high blast furnace utilization rates and low port inventories.

The key catalyst for the market was the Chinese prime minister’s announcement of the launch of a grandiose project to build a cascade of hydroelectric power plants on the Yarlung Tsangpo River with a total capacity of 60 million kW. The project involves investments of more than 1.2 trillion yuan and the creation of a new state-owned enterprise to implement it. The infrastructure sector immediately responded with a surge of optimism, which spilled over into the iron ore market: on July 21-22, prices rose by $3-4/t, and spot transaction volumes increased by hundreds of thousands of tons.

Starting on July 23, the market began to partially assess the rapid growth. Analysts’ statements about a possible speculative component in prices and uncertainty about the practical implementation of reforms in the steel sector led to a slight correction. Despite this, production indicators remained positive: CISA recorded growth in steel and pig iron production in mid-July, as well as a reduction in rebar inventories, indicating a revival in final demand.

The iron ore market continues to fluctuate between strong fundamental recovery and political uncertainty. Ahead of the Politburo meeting in Beijing, traders are cautious, taking profits and reassessing risks. However, consistently high steel production and the actual launch of major infrastructure projects are laying the groundwork for further price increases in August.

In the near term, everything will depend on how ambitious the new government initiatives turn out to be. If China confirms its course of stimulating infrastructure, iron ore will have every reason to remain above $100/t going forward.

As GMK Center reported earlier, Moody’s expects iron ore prices to remain at $80-100/t in the next 12-18 months. This forecast is due to weak demand from China and high supply in the global market.

A similar view was expressed by analysts at BMI Country Risk and Industry Research. They maintain their forecast for the average annual price in 2025 at $100/t, although they acknowledge the pressure from weak demand.