Goldman Sachs sees iron ore support at $90-95/t as costs rise

Goldman Sachs has forecast iron ore prices to remain at $90-95 per tonne in the near future, despite rising production costs. The analysts attribute the decline in iron ore prices to a more balanced market driven by factors such as reduced Chinese steel production and exports, increased supply from major Australian and Brazilian miners, and new supply from the Simandou mine in West Africa.

The cost of production has increased by over 20% over the past two years, reaching around $95 per tonne. This is primarily due to higher mining costs and freight rates, with Brazil-to-China freight rates doubling to approximately $40 per tonne. Goldman estimates that more than 200 million tonnes of iron ore is cash negative at or below $95 per tonne, while over 350 million tonnes is expected to be cash negative at or below $90 per tonne.

Analysts believe September will be the best near-term price for iron ore, as Chinese steel demand remains strong ahead of the Golden Week holiday and supply tightness is expected to decrease due to ongoing negotiations between major miners and the Chinese Mineral Resources Group. Goldman expects Chinese steel production and iron ore demand to weaken from October through November as low-cost seaborne exports and Simandou mine production increase.

Based on their cost curve analysis, Goldman views $90-95 per tonne as a solid support level for iron ore prices over the near term. The bank projects a price of $96 per tonne for iron ore in 2027 and $85 per tonne in real terms (or $95-100 per tonne nominally) for the long run by 2030.