ANZ commodity strategists Daniel Hynes and Soni Kumari anticipate iron ore prices to remain near $US100 per tonne this quarter. However, they foresee a potential drop to that level by the end of the year due to weakening fundamental factors. The analysts highlight a structural decline in Chinese demand, noting the unlikelihood of government stimulus to reverse this trend. They project a 1 per cent contraction in China’s steel demand by 2026.
Chinese steel exports, which had previously compensated for sluggish domestic demand, are also expected to weaken by 2026. This decline is attributed to the increasing impact of trade measures. The property sector continues to be a significant drag, with construction starts down 20.5 per cent year-on-year for the first eleven months of 2025. Despite this, a slight stabilisation in new construction activity is expected to moderate the decline in steel demand growth to approximately 10 per cent.
While infrastructure and manufacturing projects, including initiatives such as the Yarlung Zangpo Dam and auto/home appliance subsidies, offer some counterbalance, ANZ suggests these are less steel-intensive compared to residential construction. Consequently, these projects do not completely offset the weak demand stemming from the property sector, contributing to the anticipated downward pressure on iron ore prices.
