Fitch Solutions unit BMI has raised its 2024 iron-ore price forecast to a yearly average of $120/t from $100/t previously, as price resilience continues on the back of positive sentiment over Mainland Chinese stimulus hopes, falling port inventories and strong demand from the country's non-property sectors including machinery, shipping, autos and infrastructure.

Despite Mainland China’s uneven economic growth and a still failing property sector, blast furnace steel production and thus iron-ore demand have shown a defiance of all odds, through support from non-property sectors including shipping, machinery, autos and infrastructure, BMI outlines in its outlook for iron-ore prices report.

From January to October, Mainland China produced 874-million tonnes of crude steel, up 1.4% from the same period in 2022.

The report states that the 2024 outlook is positive, but that the long-term decline remains.

Outside of China, steel production and demand for iron-ore have shown signs of recovery in the second half of this year thus far. According to the World Steel Association’s November report, October saw a 0.6% year-on-year increase in global crude steel production, with January to October registering an average 0.2% year-on-year.

On the supply side, major iron-ore miners posted strong production growth in full-year 2022 and announced positive guidances for 2023, which will work to limit the upside for iron-ore prices along with the Mainland Chinese government’s regulation of futures markets, BMI avers.

The report shows that iron-ore production remains healthy across major miners. Shipment and production guidance broadly increased for most majors in the year compared to 2022 with most maintaining their guidances.

Some greenfield mines are also expected to reach full production capacity this year, supporting global supplies.

Over the longer term, beyond this year, the unit expects iron-ore prices to remain on a multi-year downtrend.

BMI maintains the view that iron-ore prices will consistently trend downwards, as cooling steel production growth and higher iron-ore output from global producers will continue to loosen the market.

In the longer term, it forecasts prices to decline from an average of $110/t this year to $80/t in 2032.

While considerably lower than the $156/t in 2021, the $103/t yearly average that the unit forecasts for 2023 to 2027 would still be higher than the 2016 to 2020 average of $78/t, it points out.

BMI says slowing Chinese demand growth will be the main driver of lower prices, a trend that is now already in its early stages.

A structural shift away from industrial, steel-intensive sectors towards services and less steel-intensive infrastructure will have a negative impact on iron-ore demand, it adds.

BMI expects to see an increased focus on green (low-carbon) steel globally, which requires much less iron-ore and is produced at electric arc furnaces, compared with the current blast furnace production model that requires high levels of iron-ore and coking coal, which is highly polluting.

Green steel trends also pose further downside risks for the unit’s long-term iron-ore demand forecast such that demand may peak sooner than 2027 to 2028.

Global iron-ore miners will continue expanding production in the coming years. BMI expects global mine output growth to average 2.25% over this year to 2027 compared to the average 0.9% contraction over the previous five years.

Risks to BMI’s current price outlook exist on both sides given current volatile economic conditions.

On the upside, a stronger recovery in Mainland China’s property sector will be the major influencer driving demand and supporting iron-ore prices. Also, if the market were to announce large stimulus policies in the coming weeks after a tepid recovery thus far, iron-ore prices could see a boost.

On the downside, iron-ore prices will head even lower than BMI’s current expectations if China’s economic momentum remains weak for the rest of this year and into 2024.