By Kunal Bose
Iron ore fundamentals have deteriorated significantly since the beginning of this year. Against the global benchmark iron ore prices averaging $105.53 a tonne in January, trade is now done around $95 a tonne. Largely because of seasonally low demand from the top buyer China plus falling margins of its steelmakers, the Singapore benchmark futures fell to a 13-mnth low of $93.65 a tonne on August 4. The most active Dalian contract also continues to show weaknesses. What certainly does not help the market sentiment is the unchecked fall in steel production in China with output in the first six months of 2026 at 499.95m tonnes showing a contraction of 3% over the same period of 2025.
Chinese demand for iron ore has remained soft in the face of continuing slump in construction activities. The country’s portside inventory of imported iron ore has remained at an elevated level of around 175m tonnes, 21.1% higher than at the same time last year. So, there is no urgency in China to make any big purchases at this point. Iron ore fundamentals are getting negatively affected with rises in supply in a weak demand situation. No wonder ore prices are hovering around the low end of the range.
No doubt, the major narrative for the bearish undertone in the iron ore market is demand falling short of rising supplies. But a dash of uncertainty to the trade has been added by the Bloomberg news break that big names like Cargill and Vitol have stopped doing business with Radiant World. Some other major trading houses having major exposure to iron ore are also avoiding doing business with Radiant World in the wake of allegations that it has used invalid invoices to raise funds.
For example, Deutsche Bank and KBC Group NV have frozen some of Radiant’s Singapore bank accounts, while broker Marex Group has gone a step further by freezing all Radiant accounts. Highly prudent as Chinese buyers are, they cut ties with Radiant World in June. The actions of Radiant World, in spite of its protestations that it conducts “business to the highest commercial and legal standards,” have come under scrutiny of the US Justice Department and Singapore police. Who is the principal character behind Radiant World, which claims to trade annually over 80m tonnes of iron ore worth more than $7.5bn? The person is Pinkesh Nair of Indian origin who founded the trading house in 2020.
The ground reality being improvement in near term supplies from Australia and Brazil with Simandou exports being scaled up when falling global steel production is weighing on ore demand, majority of institutions are forecasting average lower prices in 2027 than in 2026. This is in spite of providing for rises in diesel prices and freight rates, fallouts of the conflicts in West Asia. Fitch Ratings has slightly revised upward its iron ore price forecast to $85a tonne in 2027. New Seaborne supplies coming online have led Australian department of industry, science and resources to suggest a price of $82 a tonne.
The World Bank says iron ore prices will continue to register an annual average decline of 2% next year. In the meantime, considering a wide range of estimates from $77 to $108 a tonne, London based economic forecaster Consensus Economics has arrived at an average of $95 a tonne for iron ore next year. For the merchant traders iron ore price forecasts for 2027 are more like a roll of the dice. Geopolitical uncertainties that affect oil/diesel prices and as a consequence sea freight rates are far from fading away. Whatever the supply scenario, steel demand unpredictability remains. So, what will be the average 2027 ore price will remain a grey area.
The immediate concern of iron ore producers is supply continuing to exceed demand in near term, even while at the eroded present prices, rises in delivery costs following the West Asian conflict outbreak are well covered for much of the industry. But now Rio Tinto, which last year produced 327.3m tonnes of iron ore at its Western Australia mines has given the warning that supply pressure in the mineral will continue to build in the wake of depletion of reserves in mines of Australia and other countries built in the early part of the 21st century.
The price impact of the reserve depletion will be felt in the next decade. Rio has estimated that while the world will need addition of 800m tonnes across the coming decade, investments committed or proposed so far will create no more than 300m tonnes new supply capacity. This has prompted Rio’s iron ore chief executive Matthew Holcz to say: “I think the rate of depletion is very much underestimated.” No wonder then investments in new supplies are falling way short of future requirements of ore. Holcz says unlike the ore demand story, which is well understood, depletion of deposits or supply disruptions at Western Australia’s Pilbara caused by annual cyclones are not.
Indian crude steel production grew 10.7% in 2025-26 and the demand for finished steel 8% in 2025-26. This must have led Holcz to say iron ore demand boost will come from ‘global south.’ As for China, he thinks ore demand will remain steady till 2030 and then there will be a marginal fall in demand. The way steel capacity expansion is happening in India, the country may well become a net importer of iron ore ahead of Rio deadline of 2035. Major Indian steelmakers, including JSW Steel committed to raising production of green steel are increasingly finding it challenging to procure ore with high iron content from domestic sources.
The US thinktank Institute for Energy Economics and Financial Analysis (IEEFA) says steel decarbonisation and technology choices to make that happen in India will finally be decided by how the industry there makes the right quality of iron ore imports and how much of the local supply of the ingredient is upgraded through beneficiation. IEEFA says, expanding the capacity of the country’s 27 beneficiation plants from 136m tonnes to 170m tonnes by 2030 will require an investment of approximately $5.7bn. But to realise this will require of the government to cut royalties levied on beneficiated low grades of ore.
Importance of beneficiation in India is underlined by the fact that as much as nearly 65% of remaining iron ore reserves are either medium or low grades. Not only that, much of Indian ore comes with alumina content ranging from 3% to as much as 7% in fines and slimes compared with 1% and less in many other parts of the world, including Brazil and now Guinea (Simandou). More the alumina in ore, greater is the use of metallurgical coal in BF where productivity is compromised.
Incidentally, the major portion of coking coal and coke used in India is imported, the domestic supply being limited and mostly with high ash content. Nearly 95% of the country’s coking coal requirements are met by imports with at least half the shipments originating in Australia.) As a result, steelmakers will not draw comfort from India’s standing as the world’s fourth largest producer of iron ore when quality remains the issue.
According to official sources, India will extract 340m to 345m tonnes of ore this year against 316m tonnes the year before. In 2025-26, India’s iron ore imports were a seven-year high around 12m tonnes when exports, including pellets fell nearly 15% to 25.8m tonnes. Whatever the mine expansions, India’s ore imports are set to rise year by year.
Assessments of imports by 2030-31 by different agencies range from 40m to 50m tonnes, mostly of premium quality. Coast based steel plants will have an advantage in imports as they are spared of domestic rail and road freight involved in transferring imported ore from ports to inland mills. Indian imports will particularly benefit Brazil, a big volume producer of high grades of ore that Indian mills will need in increasingly bigger volumes to support decarbonisation of mill operation. No wonder Brazil’s Vale, among the world’s leading ore producers has identified India as “a strategic growth market.”
Traditionally, Tata Steel for its Indian steelmaking operation has enjoyed total supply security for iron ore based on captive mines in the states of Jharkhand and Odisha. But as the mining leases will be up for expiry by 2030, when under the mining laws these will come for auction-based allocation, the company is readying itself for at least 50% supply security from owned mines in future, according to CEO & MD TV Narendran. An informed guess will be for the balance ore requirement, the company will focus on superior grades of ore from domestic and global markets. That focus of will be guided by Tata Steel goal of becoming net zero by 2045. Use of iron ore with very low alumina content will aid its decarbonisation campaign. (IPA Service)
