Goldman Sachs Sees Iron Ore Price Floor at $90-$95 on Surging Production Costs

Goldman Sachs analysts have identified a new price floor for iron ore at approximately $90-$95 per tonne, citing a material increase in production costs that has reshaped the market's supply dynamics. This higher cost base is expected to provide solid support for prices, even as the market becomes more balanced.

A New Cost Floor

According to a note from the bank, the marginal cost of iron ore production has surged by more than 20% over the past two years. Analysts led by Paul Young estimate the 90th percentile cost, on a grade-adjusted, all-in basis, now stands at roughly $95 per tonne, a significant increase from about $75 per tonne in 2024.

This rise is attributed to broad industry-wide cost inflation, including higher expenses for diesel, labor, and freight. Goldman Sachs highlighted that Brazil-to-China freight rates have doubled to approximately $40 per tonne. Ongoing mine depletion and declining ore grades in key regions have also contributed to the higher cost curve.

The bank estimates that at prices at or below $95 per tonne, more than 200 million tonnes of global supply becomes cash-negative. This figure rises to over 350 million tonnes if prices fall to $90 per tonne, creating a strong incentive for production cuts from high-cost miners and establishing a firm support level.

Market Balancing Act

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The analysis comes as iron ore prices have recently pulled back to around $95 per tonne after averaging approximately $105 per tonne over the last two to three years. Goldman Sachs attributed this decline to a more balanced market outlook, driven by several factors:

• A moderation in Chinese steel production and exports.
• Improving seaborne supply from major miners in Australia and Brazil.
• The anticipated arrival of new supply from the Simandou mine in West Africa.

Short-Term Outlook and Forecasts

In the immediate term, Goldman Sachs views September as potentially "as good as it gets for iron ore," with prices supported by Chinese steel demand ahead of the Golden Week holiday. However, the bank expects demand and prices to soften from October through November as seaborne supply increases.

Looking further ahead, the bank forecasts a price of $96 per tonne for 61% iron ore in 2027. Its long-run benchmark forecast for 2030 remains around $85 per tonne in real terms, which it estimates would be equivalent to a nominal price of $95-$100 per tonne.