Research firm BMI is revising downward its 2023 iron-ore price forecast from a yearly average of $125/t to $110/t, owing to a weak rebound in mainland China’s industrial sector having pressured sentiment and demand for ferrous metals.

The firm notes that a “lacklustre” industrial outlook in China has weighed on prices ever since market optimism weakened, with China requesting steel mills to reduce steel production and China implementing measures to limit consumption to 2022 levels, thereby restricting iron-ore demand in the market.

BMI posits that China’s industrial sector faces a weaker recovery as compared to services, and its property sector still struggles with growth, thereby adding more pressure on iron-ore prices.

It adds that the manufacturing purchasing manager’s index returned to contractionary territory and signals a bleak outlook for iron-ore.

Elsewhere, a still weak global growth outlook and tight financing conditions continue to pressure industrial growth, resulting in waning iron-ore demand.

Nonetheless, some upside could exist should China regain its recovery momentum in the second half of 2023, based on possible stimulus measures in its property sector, the firm explains.

On the supply side, BMI expects production to grow steadily, adding that all major producers have kept their production guidance in 2023, as per their first quarter of 2023 reports.

The firm notes that many major producers have posted stronger productions quarter-on-quarter, while production guidance is expected to grow marginally.

BMI also expects greenfield mines to grow production over the rest of this year.

BMI notes that Brazilian diversified miner Vale expects to produce about 310-million to 320-million tonnes of iron-ore this year, as compared with production of 308-million tonnes in 2022.

Diversified miner Rio Tinto’s guidance for its operations in the Pilbara region of Australia is for production to range between 320-million and 335-million tonnes this year, compared with the 322-million tonnes it mined in 2022.

Rio Tinto’s Gudai Darri mine – with total yearly capacity of 43-million tonnes – is expected to reach nameplate capacity this year.

Meanwhile, diversified miner BHP achieved record iron-ore production of 132-million tonnes in its 2023 financial half-year to December 2022, compared with 129-million tonnes in the previous comparable period.

BHP’s guidance for 2023 is expected to reach between 249-million and 260-million tonnes, while its South Flank mine, in Australia, is expected to ramp up production levels steadily this year, reaching full capacity of 80-million tonnes by June 2024.

In addition, iron-ore major Fortescue’s iron-ore shipments are expected to reach between 187-million and 192-million tonnes this year, compared with the 189-million tonnes it mined in 2022.

Fortescue’s new Iron Bridge project, with a full capacity of 22-million tonnes a year, has started production as of the first quarter of 2023; while another of its greenfield projects – the Belinga project, in Gabon, is expected to come online by the end of this year.

“In the long term, we still expect iron-ore prices to follow a downward trend. We expect prices to decline to $50/t by 2032,” concludes BMI.