Share prices of Australia’s iron ore giants, BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), and Fortescue Ltd (ASX: FMG) have each seen strong gains today, propelled by an increasing price of iron ore futures. Rio Tinto shares gained 4.59%, BHP shares added 3.9%, whilst FMG saw gains of 3.55%. This makes a turnaround from downward pressure on iron ore prices and a corresponding bearish trend for the share prices that edged lower earlier in the week as iron ore futures touched nine-month lows before rallying.
Easing tensions between the U.S and China, and a potential extension to tariffs may well be playing their part in the day’s sentiment, as rare earths shares dip, alongside the iron ore gains.
The ASX200 Materials Index (XMJ) gained 355.40 points, 2.27%, as other sectors, and the ASX 200 itself pulled back (-0.43%) into the weekend.
Whilst today’s move is welcome for bulls, the prevailing sentiment in the market is one of caution, driven by a confluence of factors. Throughout 2025, iron ore prices have generally tracked downwards due to a surge in supply from both Australian and Brazilian sources, coupled with a softening in demand from China, the world’s largest consumer of the commodity.
Major financial institutions like Citigroup and Goldman Sachs have responded by revising their iron ore price forecasts downwards, projecting spot prices in the $85-$90 USD per tonne range over the next six to twelve months. Australia’s Department of Industry is even more conservative, forecasting an average iron ore price of $80/tonne for 62% Fe grade FOB for the remainder of 2025.
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The supply side of the equation remains strong. Australian exports are projected to reach a staggering 971.9 million metric tons in 2025. While Brazilian shipments are expected to decline marginally, the overall supply picture is further bolstered by Rio Tinto’s new mines in Western Australia and the anticipated commencement of shipments from the Simandou project in Guinea. This increased supply could keep prices subdued, placing pressure on the profit margins of Australian iron ore producers.
The rebound in iron ore prices above US$100 per ton in May 2025, fueled by easing US-China trade tensions and robust Chinese steel production, provided a temporary boost to major Australian miners. Rio Tinto, BHP Group, and Fortescue Metals Group all experienced substantial share price increases during this period.
Despite the long-term structural advantages enjoyed by Australian miners, such as cost efficiency and proximity to Asia, current market conditions present significant challenges. Shares of Australian iron ore producers are likely to remain volatile, with a cautious earnings outlook until there is clearer evidence of a rebound in global steel demand or a tightening of iron ore supply. We would closely monitor developments in Chinese economic policy, trade relations, and global steel demand to gauge the future performance.
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