GMK Center’s 2026 Forecast: Iron Ore

At the end of last year, GMK Center forecasted a 15% drop in Ukraine’s iron ore exports in 2025. Based on the results of 10 months, we see a decrease of 4.4% year-on-year (y/y), but by the end of the year, the dynamics may deteriorate sharply, taking into account problems with limited electricity supplies and shipments by sea.

How 2025 Went

This year’s results turned out to be not as bad as we expected. Primarily due to a milder global iron ore price decline. Steel demand in the Chinese market is deteriorating. Activity in the construction market continues to peak, growth in manufacturing sectors cannot compensate for this, despite a number of proposed stimulus measures.

According to our estimates, steel consumption in China collapsed by 6.5% y/y over the 10 months of this year. But pig iron production decreased by only 1.8% y/y. Growth in exports to record levels (+13.3% y/y, including semi-finished products) supported the balance in the raw materials market.

At the same time, iron ore supply effectively adjusted downward by 2.4% y/y (arrivals at Chinese ports), reflecting the Chinese Government’s plans to reduce steel production in the country by 5%. We should immediately add that the approach of state bodies to controlling production cuts turned out to be too formalistic.

Thus, relatively high steel and pig iron production supported the iron ore market, although it negatively affected export prices in the global steel market. As a result, the average annual price for Australian iron ore fines may reach $101 by the end of the year, which is higher than our initial estimate of $95.

Relatively acceptable prices allowed Ukrainian companies to increase iron ore exports to China by 17% y/y in 10 months. However, supplies to EU countries turned out to be disastrous, collapsing by 27% y/y. China and the EU together account for 94% of Ukraine’s iron ore exports. Indeed, steel production in the EU has declined, indicating lower demand for raw materials, but it fell at a much milder pace compared to iron ore imports from Ukraine – only by 3.8% y/y in January-October.

Part of this export dynamics may be due to a change in the product structure of Ukrainian companies, which prioritized concentrate production and reduced pellet output. This happened under the influence of market conditions: low margins for steel producers led to low pelletizing premiums, making concentrate more profitable to produce. The EU is a major market for pellets, and China is for concentrate. Therefore, there was a change not only in the product but also in the geographical structure. The share of pellets in exports decreased to 29% in 2025 compared to 35% last year.

Also, in the EU this year, several steel mills in Eastern Europe, traditionally oriented towards Ukrainian ore, were shut down.

The 2026 Market Situation

The trend in iron ore prices is firmly downward. Steel demand in China will continue to stagnate in the long term. Furthermore, the launch of the large-scale Simandou project in Guinea is expected to increase supply in the Chinese market by 20 million tonnes as early as next year. This is low-cost production in the high-quality ore segment with an Fe content above 65%, i.e., in the key segment of Ukrainian exports.

Fresh news about the introduction of a licensing procedure for steel exports from China starting in January 2026, aimed at administratively restricting exports, adds fuel to the fire. If pig iron and steel production in China declines due to exports, this will deprive the iron ore market of the support factor that worked this year.

The consensus forecast for iron ore prices in China, systematized by GMK Center, points to a drop in the average annual price to $94 in 2026. This level is close to the breakeven point for Ukrainian exports, according to our estimates. But, when we talk about the average price for the year and a downward trend, it is important to understand that the situation may be relatively favorable in the first half of the year («golden season» March-May) and sharply negative in the second half, when prices could drop to $90. Futures on the Singapore Exchange with a December 2026 expiry date are currently at $95 per tonne for Fe62%.

Other Challenges for 2026

After a series of Russian attacks on Ukraine’s energy infrastructure, questions about electricity supply and its price have resurfaced. In November, Ferrexpo announced shutdowns due to attacks on critical infrastructure.

In November, the day-ahead electricity price on Ukraine’s wholesale market was €140/MWh (+11% y/y), which is 30% higher than prices in neighboring Poland. Such high electricity prices are critical for iron ore concentrate producers, as electricity accounts for up to 60% of the cost of concentrate. Rising costs together with the downward price trend will adversely affect the operations of iron ore companies. The negative impact of the energy deficit will be especially noticeable from November until March. But the energy situation is not static and is difficult to predict – it can change in either direction.

Another challenge we’ve been talking about even before the war is logistics. The world’s largest exporters have a cost advantage over Ukraine in delivering products to China amounting to hundreds of percent, several tens of dollars per tonne. Every sea shipment from Ukraine has its own unique conditions. Therefore, the competitive position of Ukrainian exporters in the Chinese market is too vulnerable.

But logistics problems escalated sharply in mid-December with Russian shelling of the port infrastructure in Odesa. The danger of shipping via the Black Sea has increased significantly, calling into question the fate of sea shipments from Ukraine. This could have a critical impact on the prospects for iron ore exports. To understand the possible degree of impact, it is enough to look at the export figures for 2023.

Forecast for 2026

Despite a year that was not as catastrophic as expected, one of the largest mining and processing plants (GOKs) in Ukraine – Inhulets GOK – is constantly idling. Also, during the year, KZhRK and Ferrexpo were stopped at different times. And the next year does not look too promising.

GMK Center expects a 5% decrease in Ukraine’s iron ore exports in 2026, or by 1.5 million tonnes to 29 million tonnes, if prices in China show a 7% drop. Assessing the development of the military situation is practically impossible, so in our estimates we focus primarily on market factors, noting the military risks.

Given the expected price decline and the weak competitive position of Ukrainian companies in the Chinese market, the market prospects for Ukrainian exporters are not rosy. Ukrainian exporters will gradually lose the Chinese market year after year. Next year, supplies may decrease by 15-20%. Again, the first half of the year may be relatively favorable, while increased price pressure is expected in the third-fourth quarter.

The EU market, on the contrary, presents opportunities. Regulatory measures such as CBAM and the new tariff quota system will sharply reduce imports. To close the supply gap, local steel plants will be forced to increase steel production by 13-14%. This will expand the market for iron ore, which had been lost in the last three years. Therefore, Ukraine’s iron ore exports to the EU countries could increase by 10-15%.

In this article, we do not assess military risks, which are actually critical for any forecast, hoping for the earliest establishment of a lasting peace in Ukraine. The end of the war will be a «white swan» and will help, not immediately, but over time, to reduce energy and logistics costs, which could contribute to export volumes.