The iron ore supply outlook is turning progressively bearish. Chinese portside inventories are at the highest levels since 2022, reflecting an overhang of seaborne cargoes booked during the Q1 price rally. Mills are running at lower operating rates and have ample stockpiles, reducing their urgency to purchase additional volumes.
The long-awaited Simandou project in Guinea is beginning to deliver. Rio Tinto, Chalco, and the Winning Consortium are ramping production from the world's largest untapped high-grade iron ore deposit. The project is expected to add 20 million tonnes in 2026, ramping to 45 million tonnes per year by 2027. The ore is high-grade (>65% Fe) and low-impurity, making it particularly competitive vs. lower-grade Australian and Brazilian ores.
On the demand side, China's steel output is structurally declining. The OECD and other analysts expect Chinese steel demand to 'decline appreciably' due to the ongoing property sector downturn and structural economic rebalancing away from heavy industry. Chinese steel exports, which surged in 2025 to relieve domestic oversupply, face increasing anti-dumping actions from the US, EU, and Southeast Asian markets.
The combination of rising supply and falling Chinese demand creates a clear bearish trajectory. Consensus forecasts compiled by GMK Center project iron ore averaging $94/t in 2026, falling to $75-90/t in 2027 and $70-75/t by 2028. The supply overhang from Simandou is the most significant structural risk to iron ore prices since the Vale dam collapse tightened the market in 2019.
The structural outlook for iron ore is bearish, with Simandou supply and declining Chinese demand creating sustained downward pressure. For procurement, minimize forward commitments at current $100+ levels. Structure contracts with embedded price review mechanisms. The 2027-2028 consensus of $70-90/t should inform multi-year procurement strategy.