The world's biggest iron ore producers are throwing in the towel, adding tons of steel to the offshore market, while the world's biggest consumer, China, grapples with a housing crisis that is sapping demand.
BHP Group Ltd. reported record production for the fiscal year through June on Wednesday, while second-quarter production at Brazilian rival Vale SA beat expectations, bolstering its confidence of hitting the top end of its full-year forecast. Rio Tinto Group reported a rise in quarterly deliveries on Tuesday and confirmed a giant new African mine will begin production next year.
Iron ore is one of the year's worst-performing major commodities, falling by almost a quarter as China's real estate crisis drags on despite multiple rounds of government support. While the operations of the major iron ore companies remain extremely profitable given their extremely low production costs, the downturn has fueled speculation that less efficient miners could come under pressure.
On Tuesday, Rio described China's domestic demand as "subdued," noting that the country's crude steel output fell 5% year-on-year between April and May, even as exports of the alloy rose sharply. Data shows year-to-date iron ore imports have surpassed last year's pace and port inventories have soared to their highest levels since 2022, signaling ample supply.
The Australian government forecasts the country's iron ore exports will rise from 893 million tonnes this year to 940 million in 2026, while Brazil's exports will rise from 390 million to 440 million over the same period. These two countries dominate the market, with a quartet of major mining companies including Rio, BHP, Vale, and Fortescue Ltd. Prices will fall to an average of $96 a tonne this year and $77 by 2026, Canberra said in a report.
