São Paulo – Iron ore prices declined by 16.5% over the past 12 months and 22.8% year to date in the London Metal Exchange (LME). The falling prices of iron ore, which on Tuesday (12) was at USD 108.40 a tonne, have a reason: China. The country, which is the world’s largest consumer of the commodity, has a large supply and a lower demand mostly due to a downturn in construction caused by a largely indebted real estate industry. (Pictured, iron ore supply in Suzhou in China’s Jiangsu province.)
According to Guilherme Gomes, International Trade Consultant at BMJ Consultores Associados, this price reduction may be bad for mining businesses but good for consumers – who can buy it for smaller prices – and for exports from Brazil to Arab countries. Moreover, Gomes says, prices could remain lower in the medium term as they depend on China to recover.
“This price drop may be temporary, as it was the result of the combination of higher-than-expected iron ore shipments to China and a smaller demand than it was foreseen for the beginning of the year. However, the Chinese economic slowdown throughout this year may extend the downturn in iron ore prices, which could take a long time to return to previous levels,” says Gomes.
On the other hand, he goes on, this new price reality is expected to directly impact the Brazilian trade balance, as Brazil is one of the world’s largest iron ore producers. “There is a high representativeness of iron ore in Brazilian exports. It accounted for 11% of total exports from Brazil this year. China was the destination of 66% of total iron exports from Brazil in 2024. Therefore, if the Chinese demand for iron ore don’t recover in the medium term, this may have some impact on the trade balance, reducing the Brazilian trade surplus over the year,” says Gomes.
If, on one hand, this may have a negative impact on the total trade balance, Brazilian exporters can profit more from clients in the Arab world. Brazilian miner Vale exports iron ore from Brazil to Gulf country Oman, where it owns an industrial complex, from where it distributes it to other countries.
“Oman is the third largest consumer of Brazilian iron ore exports, and the Gulf states as a whole account for 5% of the demand for Brazil’s iron ore. Therefore, you can say that falling international prices of iron ore coupled with the smaller demand from China may benefit Brazilian exports to the region, as falling international prices make importing the Brazilian product more attractive, reducing costs associated with importing it. So the Gulf’s share of Brazilian iron exports could increase in the medium term,” says Gomes.
Translated by Guilherme Miranda
