Macquarie sees iron ore losing freight boost, lifts coal view

Iron ore’s resilience in the first half of the year owed more to freight markets and rising costs than tightening fundamentals, with attention likely to shift back to supply and demand in the coming months, according to Macquarie Group Ltd.

The Australian bank in a note maintained its forecast for iron ore to average $103 a ton this year and $100 a ton in the third quarter. Elevated freight costs have helped lift the industry’s cost floor to about $85 a ton, Macquarie said.

As focus shifts back to fundamentals, faster-than-expected volumes from the Simandou project in Guinea are set to add to supply growth after freight markets helped support prices in the first half, analysts including Florence Sun said. Strong Guinean bauxite exports and longer-haul trade flows lifted Capesize rates and prices.

Iron ore prices have softened over the past week, slipping below the psychological $100-a-ton mark for the first time since March, as high supply and inventories weighed on the market.

Still, China’s steel demand has held up better than many feared, with hot metal output remaining near the upper end of seasonal norms, Macquarie said. Resilient coking coal and coke prices could be an upcoming risk due to pressure on mill margins.

On coking coal, Macquarie raised its price forecasts after a deadly mine accident in China’s Shanxi province in May, with estimates for hard coking coal for 2026 up 3% and semi-soft up 1%.

The accident prompted safety inspections that have left domestic output about 9% below year-earlier levels and revived import demand, according to the bank.

(By Katharine Gemmell)