MNI INTERVIEW: China Stimulus To Hold Iron Ore Around USD100/t

MNI (BEIJING) - Beijing’s stimulus measures will likely maintain iron ore prices at about USD100 a tonne until 2025, while steel prices could see short-term upward momentum as Chinese exporters rush shipments ahead of any potential renewed trade war with the U.S., a policy advisor told MNI.

Iron ore prices will hover at current levels – January iron ore futures on the Dalian Commodity Exchange fell by 4.97% to CNY745 (USD103) per tonne so far this week – should China’s economy maintain the government’s “around 5%” growth target, said Wang Yongzhong, head of international commodity research at the Institute of World Economics and Politics, Chinese Academy of Social Sciences. 

Beijing is expected to provide further pro-growth measures next year as it will likely again target 5% growth over 2025, Wang said, adding Beijing’s CNY10 trillion debt swap plan would boost local governments’ capacity to increase investment and consumption over the long term. (See MNI: China To Raise 2025 Deficit Ratio, More Special Bonds Eyed) While this will support the construction sector, a sharp rise in demand for steel and iron ore remains unlikely as the government’s spending becomes more consumption and public welfare focused, Wang continued. 

“Policymakers intend to stabilise the real-estate market by digesting inventory, which discourages new construction activities,” he added.

New supply will also pressure prices next year, Wang said, pointing to the Simandou mining project in Guinea – set to open in 2025 – which will reportedly add about 5% to global seaborne volume. 

MNI reported last month disappointing fiscal support would keep iron ore futures below CNY850 a tonne over Q4, while high inventory levels would continue to weigh on prices. (See MNI: Iron Ore Volatility Eyed On Uncertain Fiscal Response)

STEEL EXPORTS 

While steel prices will likely fluctuate modestly amid the off-season, the commodity could rally should exporters rush shipments in the first half of 2025, Wang added, pointing to U.S. President-elect Donald Trump’s global trade policies.

January rebar futures on the Dalian exchange fell by 4.19% to CNY3268 (USD451) per tonne this week, while hot-rolled coil steel contracts dropped 3.49% to CNY3453 (USD477).

While Trump may find it difficult to implement his election promises in full due to the potential impact on U.S. inflation, a renewed trade war is unavoidable and Beijing should prepare to negotiate, Wang added. 

“This will lead to the shrinkage of global trade, not just affecting steel exports, but also demand for industrial goods made of steel,” he argued.

China's steel exports are expected to exceed 100 million tonnes in 2024, their highest level since 2016, according to MySteel forecasts. However, this seemed unsustainable amid rising tariff barriers and anti-dumping investigations, Wang added, calling for greater crude steel production control.