Short-term demand support, iron ore prices rebounded 4% in a week, Goldman Sachs warns that the 100 yuan mark may become a "ceiling"

Goldman Sachs believes that the current rise in the iron ore market is based on a reasonable short-term fundamental recovery, but the upside potential is limited, and the risk of chasing high prices is accumulating.

According to news from the Wind Trading Desk, on July 3rd, Goldman Sachs released a research report stating that the recent rebound in iron ore prices by 4% to USD 96 per ton is mainly driven by strong steel production and consumption in China, as well as an unexpected surge in imports from India, which provides solid support for prices in the range of USD 95-100.

However, investors should be cautious, as the supply growth from major global miners (such as Australia and Brazil) is forming a clear "supply ceiling," making it difficult for prices to sustainably break through USD 100.

Goldman Sachs maintains the view that the current consumption level in China can provide price support around USD 95 per ton. By the fourth quarter, iron ore may face downward price pressure, falling back to USD 90 per ton.

Strong Short-term Demand Supports Price Surge

The report points out that the price of the 62% iron ore index has surged by 4% in the past week, returning to the level of USD 96 per ton. This rebound is not unfounded but is supported by solid demand fundamentals.

First, China's steel demand remains resilient. Thanks to stable performance in manufacturing and strong steel exports, China's iron ore consumption continues to be at a high level. According to Mysteel, the daily average iron ore consumption of 247 steel mills in China is currently 3% higher than the level in July 2024. At the same time, the port iron ore delivery volume of steel mills remains high, while port inventories have decreased in the second quarter, all of which confirm the strong demand. Goldman Sachs maintains the view that the current consumption level in China can provide price support around USD 95 per ton.

Second, an important marginal change comes from India. Lower iron ore prices have led to a surge in imports by Indian consumers, causing India's net exports to drop to zero. This poses potential upside risks to Goldman Sachs' 2026 iron ore price forecast, which previously assumed that India would only become a significant net importer when shipping prices fall to USD 80 per ton in the fourth quarter of 2026.

Additionally, the market's focus on supply-side reforms in China's steel industry has also played a boosting role. Goldman Sachs stated that this expectation has improved the long-term profit outlook for steel mills, making them willing to accept higher raw material prices and triggering some short positions in the market to cover.

Clear Global Supply Growth, Heavy Pressure at the USD 100 Threshold

Data shows that global supply is steadily increasing. According to high-frequency shipping tracking data, in June of this year:

• Australia's shipments increased by 3% year-on-year, or 2.5 million tons, mainly due to the ramp-up in production from Mineral Resources' Onslow project.
• Brazil's shipments increased by 3% year-on-year, or 900,000 tons.
• Canada's shipments saw a significant year-on-year increase of 17%, reaching 800,000 tons.
• South Africa's shipments also increased by 8% year-on-year, or 300,000 tons.

This series of supply increases has effectively offset the supply disruption in Peru caused by damaged port infrastructure (Peru's shipments in June were zero, while the same period in 2024 was 1.5 million tons). The strong global supply is ultimately reflected in the surge of iron ore arrivals at Chinese ports, further consolidating the pattern of ample supply Despite strong short-term demand, the report points out that the growth of global iron ore supply will become a "ceiling" limiting price increases, making it difficult for prices to remain stable above $100 per ton. In the fourth quarter, iron ore may face downward price pressure, falling back to $90 per ton.