Iron Ore to Surpass $100 in 2024 Amid Global Deficit, HSBC Predicts

Key Takeaway

• HSBC forecasts iron ore to average over $100 a ton in 2024 due to a tight global market and deficit expected in 2024-25.
• Despite China's property crisis impacting steel demand, increased production outside China, especially in India, will support consumption.
• Iron ore futures in Singapore have averaged about $119 a ton this year, with no significant output increase from major producers anticipated.

Iron Ore Market Dynamics

Iron ore prices have experienced volatility this year, with a significant slump in the first quarter due to concerns over weakening demand from China, the world's largest importer. Prices dipped below $100 but have since staged a partial rebound, with futures in Singapore recently trading at $117.10 a ton. Despite the downturn, HSBC Holdings Plc forecasts that iron ore will average more than $100 a ton this year, underpinned by a tight global market.

China's Property Crisis and Steel Demand

The outlook for steel demand in China is clouded by the ongoing property crisis, which has led to calls from the leading steel industry group for members to reduce output. This situation reflects broader challenges in reviving the nation's property market, a crucial driver of steel demand. Analyst Howard Lau from HSBC notes, "We expect steel demand growth to be muted in the next five years, growing at about 2% as mainland China cuts back."

India's Role in Global Steel Consumption

Contrasting with China's slowdown, India is expected to record the world's fastest steel consumption growth rate. This increase in steel production outside China, particularly in India, is anticipated to aid global iron ore consumption. HSBC analysts, including Howard Lau, predict that the global seaborne market for iron ore will remain in deficit in 2024-25, further supporting prices.

Street Views

• Howard Lau, HSBC Holdings Plc (Bullish on Iron Ore):

  "Iron ore will average more than $100 a ton this year as the worldwide market remains tight... The global seaborne market for the steelmaking staple will remain in deficit in 2024-25, with gains in steel production outside China, especially in India, aiding consumption... We don’t expect a meaningful increase in iron ore output by major producers... we expect iron ore demand to remain robust, reflecting our global-steel output estimates."