Morgan Stanley analysts suggest iron ore prices may find support despite a cooling Chinese demand and increased supply. They anticipate prices averaging around $100 a tonne in 2026, with a potential dip to $95 in Q3. The resilience stems from the continued use of blast furnaces in steel production and cost pressures creating a price floor.

Weaker steel output in China and rising seaborne supply are key factors influencing the market. China's crude steel output fell in 2025, but the impact on iron ore demand was limited. Pig iron production, which relies on iron ore, also saw a smaller decline. China's iron ore imports increased, though port inventories only built late in the year.

Increased shipments from Australia, Brazil, and South Africa added supply in 2025. Additionally, Guinea's Simandou mine has begun shipping. Morgan Stanley projects the 90th percentile of the global cost curve at about $80 a tonne. Higher energy costs and a weaker US dollar could further impact pricing.

Looking ahead, analysts expect some pressure on steel output in 2026, but the production mix is expected to remain supportive for iron ore-based steel. The market's stability may also be aided by the involvement of China's joint purchasing group. Iron ore futures have fallen slightly over the last year.