What's Next for Iron Ore Prices: Key Dynamics Reshaping the Market in 2026

Iron ore bounced back from its September 2024 lows, but 2025 proved to be a mixed bag as tariff uncertainty and wavering investor confidence dampened momentum. The commodity remains tethered to global steel demand, which in turn hinges on construction and manufacturing vitality. In recent years, electric vehicle battery production has emerged as another significant demand driver, though the scale remains modest compared to construction.

The Demand Side: Where Does Steel Really Go?

China’s dominance in global steel output is undeniable—the nation produces more steel than the rest of the world combined. Yet domestic ore reserves fall short of consumption needs, making it the world’s largest base metals importer. This dependency gives Chinese economic health outsized influence on global iron ore markets. The property sector crash that began in 2021, triggered by developer collapses like Country Garden and Evergrande, continues to weigh on steel demand for construction. Although the Chinese government has rolled out multiple stimulus initiatives, the property market recovery remains elusive.

Construction typically accounts for roughly 50 percent of steel end-use consumption. Beyond China, steel demand is increasingly distributed across Southeast Asia, East Asia, the Middle East, Latin America and Africa—markets that have partially offset weakness in Chinese domestic consumption through exports.

However, a structural shift is underway. China is progressively transitioning from blast furnaces to electric arc furnaces (EAFs), which rely on scrap steel rather than raw iron ore. Today EAFs represent about 12 percent of China’s steel production, with projections suggesting this could climb to 18 percent by the early 2030s. This shift is partly driven by emissions-capping goals set for 2030 and partly by the EU’s Carbon Border Adjustment Mechanism (CBAM), which imposes levies on high-carbon imports like steel—a policy that took effect on January 1, 2026.

The implication for iron ore demand is sobering: regions expanding steel output, such as India (the largest iron ore producing state in India being a key contributor), Russia, Brazil and Iran, are generally self-sufficient in ore and don’t rely on imports. Meanwhile, European steel production faces structural headwinds as producers shift toward lower-carbon methods.

How Iron Ore Performed Through 2025

The year opened at US$99.44 per metric ton (MT) on January 6, then climbed to US$107.26 by mid-February. A sharp pullback in March dragged prices toward US$100, followed by a recovery to US$104.25 in early April. A broader base metals selloff sent prices plunging to US$99.05 by April 9. While other commodities rebounded, iron ore continued deteriorating, hitting a low of US$93.41 on July 1. The second half brought relative stability, with prices oscillating in the US$100–US$107 range. By year-end, iron ore had climbed to US$107.88 on December 4 before settling at US$106.13.

The primary culprit for weakness in the first half was the persistent slump in Chinese property development combined with fears triggered by US President Trump’s April tariff announcements. His “Liberation Day” tariffs imposed 10 percent baseline levies and threatened additional retaliatory measures, briefly sparking recession fears and commodity selloffs. Markets recovered as policymakers dialed back the most aggressive proposals.

The Supply Shock: Simandou Enters the Game

A pivotal development arrived in December 2024 when Guinea’s massive Simandou mine shipped its first ore to Chinese smelters. This mine will prove transformative. Production will ramp up over the next 30 months, reaching 15–20 million MT annually in 2026 and 40–50 million MT by 2027. Critically, Simandou ore grades at 65 percent iron content, significantly higher than many competing sources.

The mine’s ownership structure matters geopolitically. Blocks one and two are held by a Chinese-Singaporean consortium, while blocks three and four involve Rio Tinto, Chinalco and the Guinea government. This distribution allows China to diversify away from traditional Australian suppliers—a strategic objective the nation has pursued unsuccessfully for 15 years. The entry of new supply disrupts existing supply chains and shifts momentum toward buyers over sellers.

Tariff and Policy Headwinds

US steel tariffs likely won’t dramatically impact iron ore directly, since American steel demand exceeds domestic production but Chinese imports remain marginal. The US relies primarily on electric arc furnaces fed by scrap metal, not raw ore. Canada and Brazil face 25 and 50 percent steel tariffs respectively, yet both maintain exemptions for iron ore pellets. However, the upcoming 2026 renegotiation of CUSMA could change this calculus, introducing uncertainty.

Europe’s CBAM mechanism will have longer-lasting effects. By favoring lower-carbon production methods, it accelerates the global shift toward electric arc furnaces and away from raw iron ore demand.

The 2026 Outlook: Soft Growth Meets Rising Supply

While the Chinese economy is projected to expand at 4.8 percent in 2026, steel demand growth will remain constrained by continued property sector weakness. Supply is poised to surge, with all major miners increasing output, Simandou’s ramp-up being the most significant contributor. This combination—soft demand paired with expanding capacity—points to continued price pressure.

Consensus forecasts cluster in the US$94–US$105 range. Market observers expect prices to remain in the US$100–US$105 band during the first half of 2026, buoyed by seasonal demand. However, as Simandou ramps production in the second half, prices are anticipated to dip below US$100 per MT, weighted toward the consensus estimate of US$94 for the year.

The convergence of demand headwinds, supply growth and structural shifts in steel production methods suggests iron ore will struggle to find sustained price support in 2026, absent a major surprise in global growth or a geopolitical disruption to supply chains.