Metals & Mining Monitor | Iron ore price records significant weekly decline; BHP, Rio Tinto, BlueScope launch electric ironmaking initiative

Spot gold fell by 1.6% to $2616 per ounce last week. Despite a rise in gold prices following the release of the latest U.S. inflation data, the downward pressure for the week could not be avoided. Spot gold closed down by 0.98% for the week. The pullback in the U.S. dollar and Treasury yields provided some support for gold, but the hawkish policy expectations from the Federal Reserve continue to weigh on it, with officials forecasting only two rate cuts in 2025, each by 25 basis points. However, the potential impact of Trump's policies after he takes office next year, and the uncertainty surrounding his policy outlook, also offer some support to gold prices. Amid a rise in Treasury yields and the U.S. dollar, gold has plummeted over the past week. If the 10-year U.S. Treasury yield remains above 4.50%, gold may struggle to hold above the $2,600 level and could potentially test support at $2,530 again. Many analysts predict that gold prices will reach $3,000 per ounce next year, but it is expected that the upward trend will only materialize in the second half of 2025.

Iron ore prices for 62% content cargoes drop to approximately $100.9 per ton. On one side, the fundamentals of iron ore are supported in the short term. The supply is neutral with moderate shipping volumes. Although pig iron production sees a seasonal decline, it's at a gentle rate. Inventories are being reduced more than usual for the season, steel mill profits are on the rise, and port inventories are stable and somewhat robust, suggesting that prices might have been slightly undershot in the short term. On the other side, macroeconomic sentiment has caused a retreat in iron ore prices from their highs. However, expectations of stable growth policies and a decrease in high port inventories of imported iron ore provide support for prices. This has led to increased market divergence, but the upward trend could potentially continue.

Moreover, while global shipments have decreased, the overall supply remains loose, and port inventories are at high levels. With no new information on the macroeconomic front, it's anticipated that iron ore prices will fluctuate and adjust in the short term. The decline in steel mill profitability has led to a drop in demand for pig iron, and port iron ore inventories are higher than they were the same time last year, indicating a clear oversupply situation, which makes the short-term fundamentals look weaker.

The project could demonstrate that iron ore from Australia's Pilbara region can be smelted using an electric furnace, potentially replacing traditional blast furnaces that are coal-powered. Currently, over 70% of steel production relies on coal as an energy source.

The company added that definition drilling for the Moriari Deeps exploration is underway onshore in the Perth Basin, and further drilling at Lockyer-6 will be completed in the fiscal year 2025 to meet the requirements for unlocking a potential purchase price adjustment of up to AUD 327 million.