The iron ore market is under significant pressure from multiple fronts. Singapore iron ore futures have fallen to their lowest level in a year, with UBS analysts warning that the fundamentals are continuously deteriorating and forecasting further price declines to $95 per tonne by 2027.
Singapore benchmark iron ore futures dropped by as much as 2.3% during trading, hitting $93.65 per tonne, the lowest intraday level since July 2025. Meanwhile, the most actively traded contract on the Dalian exchange fell by nearly 3% over the same period. According to Bloomberg, weakening steel demand, narrowing mill profit margins, and rising supply are the core bearish factors driving the current market.
At the same time, major physical trader Radiant World has recently become embroiled in a fake invoice controversy. Vitol Group and Cargill Inc. have since suspended their business dealings with the company, while Intesa Sanpaolo SpA and Point Bonita Fund, part of Jefferies Financial Group, are reviewing their exposure to the firm. This has further increased market uncertainty. Radiant World has denied the allegations, calling the claims "completely untrue."
UBS: Prices Unlikely to Reclaim $100 Threshold
Myles Allsop, a mining and metals research analyst at UBS in London, recently stated definitively that iron ore fundamentals are deteriorating, with prices now starting to test the lower end of the range.
Allsop directly addressed market questions about whether prices could return to $100 per tonne by 2027, giving a negative answer. He pointed out that rising supply coupled with weak demand has led to significant inventory accumulation over the past 12 months, reinforcing the market's oversupply structure.
In terms of price forecasts, UBS expects the average price of iron ore to be around $100 per tonne in 2026, before falling further to about $95 per tonne in 2027. Allsop believes that as the market surplus expands, prices will gradually decline, eventually stabilizing near the 90th percentile of the cost curve, which is around $90 per tonne.
Cost Support Weakening
Allsop also noted that rising diesel and freight costs have, to some extent, lifted the cost support level for iron ore. However, the impact of this factor is expected to fade over the next 12 months, assuming a ceasefire agreement is maintained and oil and gas prices return to normal ranges.
This suggests that some cost-side factors that previously supported iron ore prices may be unsustainable, further compressing the downside buffer for prices.
Scrap Steel Substitution Effect May Emerge from 2027
UBS also highlighted a medium-term structural variable. Allsop expects that steel scrap will gradually replace iron ore demand starting in 2027, driven by a tightening carbon emissions trading system.
However, Allsop acknowledged that the scale and pace of this substitution process are highly uncertain, heavily dependent on the integration of scrap recovery and processing systems, as well as the level of supporting policy.
Radiant World Events Add to Market Pressure
According to Bloomberg, Radiant World has grown into one of the major participants in the physical iron ore market in recent years. The ongoing fake invoice controversy has prompted multiple institutions to review their exposure, casting a shadow over market sentiment against a backdrop of already pressured fundamentals.
Analysts point out that the Radiant World incident is a market sentiment disturbance rather than a core factor driving iron ore prices down. The structural imbalance of supply and demand is the more fundamental bearish factor.
Comments