Goldman Sachs Sees Iron Ore Price Floor at $90-95 Amid Rising Production Costs

A significant rise in industry-wide expenses has pushed the iron ore market's cost curve sharply higher, establishing a new price support level of approximately $90-95 per tonne, according to an analysis from Goldman Sachs. The investment bank noted that marginal production costs now provide a firm floor for prices, which recently pulled back to around $95 per tonne.

Rising Costs Establish New Price Floor

In a research note, analysts led by Paul Young detailed an update to the firm's proprietary global iron ore cost curve. The analysis found that the 90th percentile marginal production cost, on a grade-adjusted and all-in sustaining basis, has surged by more than 20% over the past two years, climbing from about $75 per tonne to a current level of $95 per tonne.

Goldman Sachs attributed the increase to several factors, including sustained inflation in diesel, freight, and labor costs. The bank highlighted that seaborne freight rates from Brazil to China have doubled to approximately $40 per tonne. Ongoing mine depletion and declining ore grades in key regions like China and India were also cited as contributing pressures.

Supply and Demand Dynamics

The recent price decline from a two-to-three-year average of around $105 per tonne reflects a market in the process of rebalancing, the report stated. This is driven by downward revisions to Chinese steel production, improved seaborne supply from major miners in Australia and Brazil, and the introduction of new supply from the Simandou mine in West Africa.

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At the current price levels, a substantial volume of global production is at risk. Goldman Sachs estimates that at or below $95 per tonne, over 200 million tonnes of supply are operating at a cash loss. If prices were to fall to $90 per tonne or lower, that figure would increase to more than 350 million tonnes of unprofitable supply.

Near-Term Outlook and Forecasts

While Goldman Sachs sees September as a near-term "sweet spot" for iron ore, supported by pre-Golden Week holiday demand in China, the bank anticipates a softening in demand from October through November. This is expected as seaborne exports from major producers and Simandou increase.

Nevertheless, the $90-95 per tonne range is described as a "solid downside support line," a level reinforced by reports that some high-cost producers have already announced output cuts. Looking further ahead, Goldman Sachs forecasts a 2027 price of $96 per tonne for 61% Fe iron ore, with a long-term 2030 benchmark price of approximately $85 per tonne in real terms.