Iron Ore Set To Slide Further As Trump Tariffs, China Slowdown Collide, Goldman Says

Iron ore could be set for further declines, according to Goldman Sachs, which reiterated its short case after concluding field research in China, the largest global consumer of base metals.

The investment bank visited six private steel mills in the Beijing/Tangshan region, evaluating sentiment among mill operators, who forecast a 5% drop in domestic demand in 2025. Although utilization rates are high for now, output is expected to slow as crude steel production cuts take effect in the second half of the year. In parallel, Chinese steel exports are projected to fall by 15% next year, pressured by global protectionism, including recent U.S. tariffs.

Thus, it is straightforward to understand Goldman's pessimistic view of iron ore futures expiring in 2026,  which the bank advised as a short as early as last December. Back then, this contract traded at $99.89 per ton and has since come down to around $93. The bank's analysts predict a further drop to $84 per ton in the second half 2025.

Analysts believe President Donald Trump's tariffs will send shockwaves through global trade, negatively impacting Chinese exports to major markets like Vietnam and dampening overall demand. In the short term, the China Mineral Resources Group, the state-owned iron ore buyer, is a crucial stabilizing factor.

Reports suggest that the state entity has an inventory of 10 to 20 million tons at ports and has strategically released supply into the domestic market during tight conditions to help manage price fluctuations.

This situation poses a serious economic threat for Australia, the world's largest iron ore exporter. Mining accounts for 12.2% of the country's economy, nearly half of which is iron ore. A prolonged price drop could seriously hurt the trade balance and reduce government income at a transitional time, as federal elections will be held on May 3.

Last week, the Reserve Bank of Australia kept the cash rate steady at 4.1%, citing uncertainties tied to Trump's tariff plans.

"These developments are expected to have an adverse effect on global activity, especially if households and businesses hold off on spending while waiting for more clarity on the outlook," the bank's board said per AFR.

However, since then, the tariff announcement has pushed the Australian dollar 5% lower vs. the U.S. dollar, dropping it to the lowest since March 2020 and likely pausing any rate cut plans. If that weakness persists, the next Australian Prime Minister will inherit a hot seat—dealing with a shrinking budget while balancing a tight monetary policy.

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