Today, DCE iron ore futures trended firm, pulling back slightly in the afternoon. The I2609 contract closed at 738 yuan/mt, up 0.14% from the previous trading day. Port spot prices rose 2–3 yuan/mt from the previous trading day. Traders were active in quoting, steel mills purchased as needed, buying interest was moderate, and as of now, spot transaction volumes were relatively low. Looking ahead, with the downstream entering the off-season and mine shipment pace slowing down, the iron ore supply side is expected to tighten slightly, but the overall ample supply pattern is unlikely to change. Last week, SMM global iron ore shipments totaled 35.16 million mt, up 1.53% WoW, and cumulatively up 1.77% YoY. Among them, Australia's shipments edged down 6% WoW, but Brazil's shipments surged nearly 20% WoW, while shipments from non-mainstream countries edged up MoM. Among the four major miners, Rio Tinto and FMG saw shipment declines. In addition, last week, SMM China iron ore arrivals totaled 28.78 million mt, down 1.88% WoW, and cumulatively up 6.07% YoY. Based on comprehensive analysis, iron ore prices are likely to fluctuate within a range in the near term, but the bearish pattern will persist in the long term. [SMM Steel]

[SMM Insights] China's Steel Export Landscape to Middle East Reshaped: Finished Products Stall while Billets Stand Out Looking back at 2025, the Middle East market was undoubtedly the most dazzling "emerging dynamic market" in China's overseas steel landscape. In 2025, China's total steel exports to the Middle East reached 15.81 million mt, with monthly shipments basically stable in the high range of 1.2–1.3 million mt. Against the backdrop of total annual steel exports of 134 million mt, up 14% YoY, the Middle East market accounted for 11%–12% of China's total overseas steel export share. This means that in a single geo-economic region, its share and strategic reliance were second only to Southeast Asia, serving as the "second largest core pillar" for China's steel going global. In terms of product mix, high-added-value HRC (29% share), steel pipes essential for oil and gas projects (18% share), and medium-thickness plates (14% share) formed the three dominant players, reflecting the region's strong diversified industrial and infrastructure throughput capacity. However, it was precisely due to such a massive trade base in 2025 and high reliance on conventional Persian Gulf shipping lanes that when geopolitical storms suddenly struck and straits were dramatically blocked, the resulting "broad market stall" and supply chain disruption were so severe. Below, we will analyze in order: the specific situation of China's steel exports to the Middle East, how cargo pressure was shifted through port replacements during the strait blockade, and how the export landscape will be reshaped after the latest US-Israel negotiations? The "Stall" and Structural Anomaly of China's Steel Exports to the Middle East Data Source: SMM, China's General Administration of Customs First, let's look at total export performance. According to SMM historical data and the latest customs export trends, China's total steel exports to the Middle East in the first four months of 2026 plummeted from 5.47 million mt in the same period of 2025 to 3.57 million mt, with April exports directly halving. Specifically, among China's 5.47 million mt of steel exports to the Middle East from January to April 2025, a highly advanced finished-product-oriented export characteristic was evident. HRC (29%), steel pipe (18%), coated steel (15%), and medium-thickness plates (14%) constituted the four mainstays of China’s steel trade. In terms of destination countries, Saudi Arabia’s rigid demand for offshore/oil & gas pipe (986,000 mt) and the UAE’s strong processing throughput of general HRC (1.607 million mt) and medium-thickness plates (779,000 mt) jointly established the traditional “dual-core consumption hinterland” within the Persian Gulf. Data source: SMM, General Administration of Customs of China Supply Shock and Physical Scissors Gap: The “Billet Export Bonanza” Under a Double Squeeze Since the start of 2026, the blockade of the Persian Gulf Strait caused by geopolitical conflicts significantly weakened overall shipments, while a dramatic “underlying mutation” simultaneously unfolded in the product mix. Steel billet, a minor product that previously accounted for only an 8% share (431,000 mt), registered a strong countertrend increase of 24% in the first four months of 2026. According to the SMM survey, the underlying driver of this anomaly originated from a localized supply shock induced by geopolitical shifts in Iran. If the closure of the Persian Gulf Strait severed the “aorta” of Middle Eastern steel imports, the sudden destruction of Iran’s two largest steel giants—Mobarakeh Steel Company (MSC) in Isfahan and Khuzestan Steel Company (KSC)—on March 27, 2026, completely ignited a “raw material upheaval” within the region. Iran is the world’s tenth-largest and the Middle East’s largest crude steel producer (accounting for over 50% of the region’s total crude steel output), with annual steel exports exceeding 10 million mt, among which semi-finished steel billets are the absolute mainstay. Mobarakeh (MSC) has an annual capacity of 11.8 million mt (20% of Iran’s total capacity), making it the undisputed “King of Flat Products/Sheets & Plates” in the Middle East; Khuzestan (KSC) is Iran’s second-largest steel producer and its most critical production base for slabs and billets. Data source: SMM, General Administration of Customs of China Under normal conditions, Iran was the primary supplier of low-priced steel billets to local rolling mills in the Middle East. With the sharp contraction in Iran's external supply, rolling mills in the Middle East, particularly in Oman and parts of the UAE outside the Gulf that were not directly affected by the blockade, faced severe raw material supply disruption risks. To maintain production, local buyers quickly released a large number of urgent inquiries to the international market. According to SMM survey, the huge demand gap for steel billets created by Iran's exit was filled and shared by supplies from China, India, and Russia. Because the local shortage was mainly crude steel raw material for rolling sheets and plates, and the equipment destruction from explosions meant that rolling lines were the first to restart, the main incremental product in these counter-trend orders was steel slab. This situation shares similarities with the article at https://mp.weixin.qq.com/s/bsrZaRRSRDHC_FmGLulJOQ (Middle East turmoil triggers "mismatch", China accelerates filling a supply vacuum of about 2.3 million mt in Southeast Asia), which mentioned that China would accelerate taking over steel billet supply gaps. That is, despite the decline in steel exports this year, billet exports also achieved counter-trend growth. Stock Game: The "X-Shaped Crossover" of Inside-Gulf Shutdowns and Outside-Gulf Safe Havens Verified by SMM through freight forwarders, steel trade (especially medium-thickness plates, pipes, and steel billets) relies heavily on bulk or breakbulk vessels. When container liners encounter blockades, they can easily reroute by amending bookings via computer systems, but the diversion of bulk carriers faces rigid constraints from destination port drafts, specialized handling equipment (such as large quay cranes), and inland truck connections. Therefore, over the past two months, the supply chain staged a dramatic "port drift" inside and outside the Persian Gulf. The following uses SMM's panoramic shipping data to explain in detail the changes in cargo flow between ports. Under normal conditions, over 70% of China's steel shipments to the Middle East converged densely on Jebel Ali Port inside the Persian Gulf and Dammam Port on the eastern coast of Saudi Arabia. But after the strait blockade, steel port arrivals at these two traditional hubs showed a historic "physical shock" in SMM's high-frequency shipping data (falling to zero from April to May). Meanwhile, the diverted cargo, fighting to survive, surged wildly toward alternative ports outside the strait, tearing open a "lifeline of safety" spatially: ① "Overload Surge" at Oman's Port of Sohar: As the most critical cross-border multimodal transshipment hub outside the Gulf, its port arrivals in April surged nearly fivefold MoM. Large batches of Chinese HRC and steel billet originally destined for the inner Gulf were forced ashore here, causing massive congestion at the port in May as cross-border heavy truck capacity collapsed. ② "Western Route Counterflow" at Saudi Arabia's Jeddah Port: Saudi Arabia abandoned its eastern sea route (Dammam Port) nationwide, forcibly redirecting all Chinese orders to Jeddah on the Red Sea side, causing its throughput to surge to a peak of 361,000 mt in April. Source: SMM, Google Maps However, it should be noted that while cargo can be transferred via other ports in the short term, port arrivals in May have already shown a weakening trend again. The reason is that alternative ports outside the Gulf simply cannot handle such massive and concentrated cargo volumes, leading to extremely severe congestion. According to SMM's survey, because navigation within the Gulf is no longer possible, some shipping lines originally bound for Jebel Ali had to divert to Fujairah, but are still queuing for berths. Jeddah Port faces similar issues. With tight capacity, prices keep surging, and transportation faces severe obstacles. Source: SMM Outlook for Change: With the US-Iran blockade-lifting deal, what impact will the shipping supply chain face? After 108 days of the "dual blockade" (Iran's blockade of the strait and the US's counter-blockade of Iranian ports) that gripped the lifeline of global energy and commodities, the US and Iran officially issued successive high-profile statements announcing a ceasefire memorandum of understanding. The relevant timeline is summarized below. Data source: Compiled by SMM from public channels The news, once released, triggered a strong market reaction. On one hand, there are expectations for export increments from shipping recovery; on the other hand, there are certain demand expectations for post-disaster reconstruction. According to the latest SMM survey, most exporters have not responded enthusiastically to the lifting of the blockade and remain skeptical about its actual implementation. Therefore, from the perspective of actual order-taking, shipments to the Middle East still need 3 to 4 weeks to be verified. If a full lifting is confirmed, the "demand backlog" caused by the earlier shipping disruptions will see a concentrated release. Based on past customs data and the local supply-demand balance table, SMM roughly predicts that finished steel products will experience strong growth expectations, potentially filling a disaster-induced gap of approximately 1.7-2.1 million mt. Among them, HRC accounts for the highest proportion (29%) of China's finished steel exports to the Middle East. Although the Middle East's largest flat steel giant, Iran's Mobarakeh Steel Company (MSC), has reported production resumptions for its blast furnace previously damaged by war, its capacity is in a post-disaster repair phase and is not expected to fill the local gap in the short term. However, recent market rumors suggest that Indian resources are seizing the Middle Eastern market at lower prices, which will also pose some impact on China's export order-taking. However, for semi-finished products, the reason Chinese steel billets have been "hot" in recent months is the supply gap caused by the strait blockade and the bombing of Iranian steel mills. Once Iran's logistics fully recover, Chinese steel billets will lose their advantage in absolute price, logistics distance, and surrounding multilateral competition, and the demand gap in Southeast Asia previously filled by substituting Iranian sources may also be reclaimed. Recently, according to SMM surveys, billet resources are already circulating in the Middle Eastern market. Through the following comparison of comprehensive landed costs (CFR) for billets in the Middle East, it can be clearly seen that Chinese resources are under comprehensive pressure: Source: SMM Therefore, steel billet exports to the Middle East are expected to be somewhat limited, with competition only possible at lower prices. Preliminary forecasts indicate a pressure reduction of 50,000–250,000 mt. However, we need to broaden our perspective to the global multilateral trade context, and we must not fall into excessive pessimism due to localized marginal reductions. Although the billets exported to the Middle East are under pressure, the incremental steel billet volumes that previously replaced Iranian exports to Southeast Asia may not necessarily be wiped out. Given the uncertainty of the Middle East situation and based on considerations of a more stable supply chain, Southeast Asian buyers may continue to source from Chinese suppliers. Therefore, against the backdrop of an overall steel recovery and resilience in steel billet prices, SMM maintains its earlier view, holding a moderately optimistic stance on annual steel exports, with expectations of "steady incremental growth." Finally, it needs to be added that, currently, due to severe port congestion, even if the strait is confirmed passable, it will still take a long time for actual cargo to arrive and cannot immediately be reflected in the data. At the same time, ocean freight rates will also maintain high-level fluctuations in the short term due to unfavorable port cargo pick-up. 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Every $10 increase in crude oil prices is expected to raise the per-ton extraction cost of large iron ore mines by an average of $0.3, while the cost for small mines is expected to rise by about $2.85. High-cost small mines, especially iron concentrate producers, will be very vulnerable when facing cost shocks, and mines with different product types will face varying degrees of impact.

In modern mining operation systems, the extraction and delivery of iron ore constitute a highly energy-intensive industrial closed loop. By 2026, energy price fluctuations effectively transmit inflationary pressure to the cost structure of iron ore through the following three key physical and economic pathways: First, the impact of diesel costs in the mining and inland transportation segments. Whether in drilling, blasting, and loading during mining operations, transporting ore from pits to crushing stations using heavy-duty mining trucks, or hauling finished ore to ports via diesel locomotives over hundreds of kilometers of railway lines, the entire upstream mining and inland logistics chain is extremely dependent on diesel. As international oil prices surpassed $100 per barrel, diesel's share of overall mine operating costs rose rapidly, significantly increasing cost pressure. Second, the transmission of electricity and natural gas costs in the beneficiation and agglomeration segments. Iron ore resources of different grades vary in processing depth. Lower-grade magnetite requires deep beneficiation processes such as crushing, magnetic separation, and flotation, all of which are highly dependent on electricity. In the process of converting fine-grained iron ore concentrates into pellet or sinter suitable for blast furnace ironmaking, high-temperature roasting above 1,300°C is required in equipment such as chain grates and rotary kilns. This agglomeration segment is extremely dependent on thermal energy from natural gas or coal, resulting in pellet production costs exhibiting very high elasticity to natural gas price changes. Third, low-sulfur fuel oil price fluctuations in the transoceanic shipping segment. As one of the largest dry bulk commodities by global trade volume, the landed cost (CFR/CIF) of iron ore is highly influenced by transportation costs. In March 2026, due to crude oil supply deficits and route diversions triggered by conflicts in the Middle East, global very low sulfur fuel oil (VLSFO) prices surged dramatically by 30% to 60% within a single week. This change fundamentally reshaped the relative competitiveness of iron ore from different producing regions in major consuming markets such as China and Europe. As of mid-April 2026, the global macro energy market is at a critical juncture where deep structural adjustments intersect with geopolitical conflicts. The escalating conflicts in the Middle East have exposed the fragility of global energy supply chains, causing prices of crude oil, natural gas, and alternative energy sources such as coal to experience sharp nonlinear increases that exceeded expectations. The crude oil market has exhibited particularly pronounced sensitivity. Before the outbreak of the conflict, the global crude oil market fundamentals were relatively stable, with Brent crude oil prices hovering between $70 and $77 per barrel during January and early February. However, as the conflict continued to escalate and shipping through the Strait of Hormuz was disrupted, Brent crude oil futures prices briefly approached $120/barrel in early March. The natural gas market was also significantly impacted. Qatar, a major liquefied natural gas (LNG) exporter, saw its core onshore production facility (Ras Laffan gas plant) hit by drone strikes and completely shut down, suspending LNG deliveries. Natural gas prices, including Asia-JKM and Europe-TTF, doubled within two weeks. This non-linear cost surge was highly likely to force some marginal high-cost mines to cut production, thereby contracting the total global iron ore supply and providing strong trend-based support for the forward market price center. II. Differentiated Impact of Energy Price Fluctuations on the Iron Ore Market: A Perspective by Ore Type Every $10 increase in crude oil prices was estimated to raise the per-mt mining cost for large iron ore mines by an average of $0.3, while costs for small mines were expected to increase by approximately $2.85 . High-cost small mines, especially iron ore concentrates producers, were highly vulnerable to cost shocks, and mines producing different product types faced varying degrees of impact. When assessing the impact of energy prices on the iron ore market, a comprehensive analysis across multiple dimensions is required, including the global supply landscape, product mix (lump ore, fines, pellet ore), and mining processes at individual mines. Due to inherent differences constrained by resource endowments, mines exhibited significant divergence in operational resilience and cost vulnerability when facing the same energy inflation cycle. The physical and chemical properties of iron ore fundamentally determine the complexity of its mining and beneficiation processes and energy consumption structure. This structural difference in turn affects each mine's dependence on and price sensitivity to different energy types. Based on ore type, mainstream global iron ore assets can be broadly classified into two categories: direct shipping ore (DSO) hematite and magnetite concentrates. Direct Shipping Ore (DSO) requires only simple physical crushing and screening before being directly loaded for export, without complex beneficiation processes. In terms of production distribution, Australia's Pilbara region is the core production area for global hematite DSO . The region's iron ore reserves are primarily concentrated in the Hamersley Range of Western Australia. Brazil's Carajás mine, operated by Brazilian mining giant Vale, is the world's largest existing iron ore mine. In terms of energy mix, the DSO production process is highly concentrated in open-pit mining, loading, and truck haulage, making its operating costs extremely sensitive to diesel prices. It is worth noting that the Carajás mine relies primarily on hydroelectric power from the Tucuruí Dam, which to some extent buffers its direct exposure to oil price fluctuations. By contrast, mines in Australia's Pilbara region, due to their remote locations and limited power grid access, are more heavily dependent on diesel for mining operations (drilling and blasting, loading, and ultra-heavy truck haulage). Diesel fuel costs account for approximately 15% to 25% of the total operating costs of a typical iron ore mining operation in the Pilbara . For remote mining areas with longer haulage distances, this proportion is even higher. Magnetite assets have mining and processing pathways that are far more dependent on electricity than on fuel . Magnetite must undergo extensive crushing, ball milling, and magnetic separation processes before entering the metallurgical process. Typically, magnetite concentrates require grinding the ore to 32–45 microns to produce high-quality concentrates with low silicon content. The impact of this process on energy consumption is significant. Compared with hematite, magnetite beneficiation and processing consumes approximately 30–40% more energy, but the pellets it produces contain less than 2% silica, resulting in superior final product quality. In terms of processing costs, magnetite processing costs approximately $50–70 per mt, far higher than the $20–30 for hematite. From an energy sensitivity analysis perspective, since the primary energy consumption in magnetite concentrates production is concentrated in the electricity-intensive grinding and magnetic separation processes, direct dependence on diesel is relatively low. The linkage proportion of diesel costs in total costs is estimated at approximately 6–10% . However, this does not mean that magnetite mines can completely avoid energy crises. If the power grid in the region is highly dependent on natural gas or coal for power generation, rising electricity prices would likewise have a significant impact on their cost structure. III. Cost Structure Comparison between China's Mines and the Big Four Miners under the Energy Price Transmission Mechanism Under a scenario where oil prices rise by $30–40 per barrel, the increase in iron ore C1 costs is estimated at approximately $1–3 per mt, corresponding to an increase of 5%–15%. Based on the proportion of diesel costs and the energy transmission mechanism, the most affected are first small mines (diesel accounting for 25%–40% of C1 costs, extremely dependent on long-haul trucks and high stripping ratio equipment), followed by mines such as BHP and FMG that are highly dependent on diesel-powered heavy equipment. Although Rio Tinto's mining operations also rely on diesel, its diversified mining business dilutes the impact to some extent, spreading the average cost of iron ore. Mines like Vale that utilize green electricity for mining operations are relatively resilient to energy prices, but their extensive railway and fleet operations still carry diesel exposure. Domestic mines primarily rely on underground mining and highly electrified mineral processing, so diesel has a relatively moderate impact. Domestic Mines In the cost structure of domestic mine production in China, diesel consumption is mainly concentrated in the open-pit mining stage , particularly in the transportation of ore and overburden by mining trucks, which is the primary use of diesel; underground mining is predominantly powered by electricity, with minimal diesel usage. Meanwhile, due to the high degree of electrification, domestic ore consumes almost no diesel in the mineral processing stage, and diesel costs only affect the mining cost component. In terms of proportion, mining costs typically account for 30%–40% of the full cost of iron ore concentrates, while diesel expenses only account for 15%–20% of mining costs. Based on actual industry consumption estimates, diesel consumption for excavating and transporting one mt of raw ore is approximately 2–3 litres, so the impact of diesel price fluctuations on the overall full cost of domestic mines is relatively limited . Ex-China Mines Compared with ex-China mines, in the global iron ore supply system, the four major miners — BHP, Rio Tinto, Vale, and FMG — collectively contributed approximately 60% of global seaborne iron ore supply. The four companies differ in resource categories, process pathways, infrastructure investment, and energy mix, placing them at distinctly different positions on the cost curve. The core metric for measuring iron ore producer efficiency is C1 cash cost (i.e., the direct production cost from pit to port, excluding capital expenditure, royalties, and freight). BHP BHP's Western Australia Iron Ore (WAIO) C1 unit cost in FY2025 (ending June 2025) was $17.29 per mt, once again confirmed as the lowest-cost major iron ore producer globally. The core of BHP's cost advantages stems from economies of scale and highly integrated infrastructure. Its Pilbara mining region has five large mines, which together with dedicated rail and port facilities form an integrated supply chain. In 2025, the mines also advanced the full deployment of autonomous haul trucks, further enhancing operational efficiency. However, while automation reduced labour costs, BHP remained highly dependent on diesel, with heavy equipment in the mining, loading, and transportation stages still primarily diesel-powered. Historical data corroborated BHP's sensitivity to oil prices. In FY2022, when oil prices surged due to the Russia-Ukraine conflict, WAIO's C1 unit cost rose from $12.98 per mt in the prior year to $15.05 per mt, with one of the key drivers being rising diesel prices, along with ramp-up costs at the South Flank mine. To this end, BHP has been trialing hydrogenated vegetable oil (HVO) as a diesel alternative at its Yandi iron ore mine, aiming to gradually reduce dependence on fossil fuels, though large-scale substitution still requires time. For FY26, BHP provided a WAIO unit cost guidance range of $18.25–19.75 per mt, acknowledging the impact of lagging labor cost inflation effects. FMG (Fortescue) FMG's core operations are located in the Pilbara, the same as BHP, but there are several differences in cost structure. FMG achieved record full-year iron ore shipments of 198.4 million mt in FY2025, with hematite C1 costs falling to $17.99 per wmt — the company's first annual cost reduction since FY2020 — enabling it to maintain its position as the industry's lowest-cost producer. FMG's Iron Bridge magnetite concentrates project (product grade of approximately 67% Fe) is continuing to ramp up, which will improve the product mix while introducing higher electricity consumption, making FMG's overall energy structure more complex. At the energy strategy level, FMG's approach is the most aggressive among the four major miners. The company announced a $2.8 billion partnership agreement with Liebherr to jointly develop zero-emission mining equipment, encompassing battery power systems, with the first autonomous trucks already entering the deployment phase. However, FMG also acknowledged the cost of strategic adjustments — the company decided to shelve its Arizona green hydrogen project and the Gladstone PEM50 project, citing a rollback in US policy support for green energy and slow development of the global green energy market. For now, FMG's diesel exposure is similar in nature to BHP's, and the transmission mechanism of energy price fluctuations to its C1 costs is highly comparable. Vale Vale's energy structure is the most unique among the four major miners, and as a result, it has a distinctly different energy sensitivity compared to the other three. Vale achieved its goal of 100% renewable energy use across all its operations in Brazil in 2023, with electricity sourced from its own hydropower, wind, and solar assets, with a total installed capacity of 2.6 GW. Specifically at the Carajás mine, the operation relies heavily on hydroelectric power generated by the Tucuruí Dam. This means that the electricity costs for Vale's beneficiation, crushing, and conveyor belt transportation processes are not linked to international oil prices, but are closely tied to Brazil's domestic hydropower resources and regulated electricity prices. However, this green power shield cannot fully insulate against the impact of fossil energy price fluctuations. Vale's largest energy consumption item is electricity, followed by diesel. Diesel is primarily used to power ultra-heavy trucks in open-pit mines and railway locomotives connecting Carajás to the ports in Maranhão state. This railway stretches approximately 900 kilometers. In other words, although Vale's electricity costs are largely decoupled from oil prices, whenever diesel prices rise significantly, its massive mining fleet and railway transportation system still experience notable cost pressure. Rio Tinto Compared with the other three mines, Rio Tinto's Pilbara C1 cash cost averages approximately $23.7 per mt, about $5 higher than BHP and FMG. This cost premium has multiple root causes. First, Rio Tinto's Pilbara ore mix is more complex than BHP's, encompassing multiple ore types including Brockman hematite, Marra Mamba blended ore, and Channel Iron Deposits. The varying mining difficulty, moisture content, and beneficiation processing requirements across different ores are significantly different, thereby pushing up average costs. In its 2024 performance guidance, the company explicitly noted that "increased Pilbara mine operating intensity and continued labor and parts inflation in Western Australia" were the primary factors driving costs higher. Second, Rio Tinto simultaneously operates a diversified mineral portfolio including aluminum, copper, and titanium ore. Its scale focus and infrastructure specialization in the iron ore segment are less concentrated than those of BHP and FMG, which to some extent undermines its cost advantages. Differentiation in Energy Price Transmission Among the Big Four Miners Looking at the cost structures of the four companies collectively, the transmission mechanisms of energy price fluctuations among the Big Four miners exhibit clear divergence. BHP and FMG are the most sensitive to oil prices. Both companies have Australian Pilbara hematite DSO as their core assets, with production processes highly dependent on diesel-powered heavy mining equipment. In a scenario where international crude oil prices experience a significant rise (e.g., $30–40 per barrel), based on BHP's historical transmission coefficient from 2022, the C1 costs of both mines could face a direct impact of $1–3 per mt, translating to a cost increase of approximately 5%–15%. Vale's energy exposure presents a "two-segment" structure. In electricity-intensive processes, it has virtually no direct exposure to oil prices; however, the reliance of mining trucks and railway locomotives on diesel still constitutes a non-negligible hidden risk. Furthermore, if drought affects reservoir water levels, its hydropower-dependent electricity costs could also experience an unexpected rise — a unique climate risk that Australian mines do not face. Rio Tinto's energy exposure carries dual attributes of both oil prices and electricity prices. Mining operations in the Pilbara region rely on diesel, while its aluminum and copper mining businesses operating in Canada, Northern Europe, and Mongolia are highly dependent on electricity, creating a composite energy risk exposure at the group level. In a scenario of pure oil price increases, the cost transmission pathway for Rio Tinto's iron ore segment is similar to that of BHP, but its overall degree of impact is slightly lower due to dilution from diversified operations. For small mines, diesel consumption typically accounts for 25% to 40% of their C1 cash operating costs . Small mines generally lack sufficient capital expenditure (CapEx) to build or lease dedicated rail lines. From pit-mouth loading to delivery at the port, their ore is highly dependent on diesel-powered heavy trucks for long-haul road transportation, which amplifies the share of diesel in per-mt costs. Meanwhile, due to deeper ore body burial or weaker grades, higher stripping ratios require moving more waste rock to produce the same weight of iron ore, resulting in higher fuel consumption per unit of output for drilling, blasting, and loading equipment. IV. Rising Transportation Costs from Crude Oil and Shipping Risks Will Have the Most Significant Impact on CFR China Iron Ore Costs From a macro perspective, all four major miners are additionally affected by fluctuations in the Australian dollar/Brazilian real exchange rates against the US dollar. Local currency depreciation can serve as an effective hedge when energy costs rise, and vice versa. This also explains why, during the same energy inflation cycles, C1 costs denominated in US dollars typically do not move fully in sync with crude oil price increases. Furthermore, iron ore must pass through a shipping stage en route to Chinese ports. Rising fuel oil costs directly drive freight rate increases on the C3 (Brazil to China) and C5 (Western Australia to China) routes. At the same time, heightened geopolitical tensions in the Middle East have elevated shipping risks, and surging insurance premiums have simultaneously pushed up ore import costs. The compounding of multiple factors could result in iron ore freight premiums on the relevant routes exceeding $10-15 per mt. In summary, the impact of energy price changes on mine production costs is closely related to the specific product type and the mining equipment used. Large mines are significantly less affected by energy price increases than small and medium-sized mines. In contrast, exchange rate movements and changes in transportation costs are more sensitive to energy prices and also more directly drive fluctuations in overall iron ore prices.

I. Supply-Demand Pattern Shift Puts Iron Ore Prices on a Downtrend In 2021, driven by inflation expectations from global quantitative easing, frequent supply-side disruptions in Brazil and Australia, resilient demand in China, and strong speculative sentiment, iron ore prices hit a record high of $219.77/mt in July that year, with Platts’ annual average price as high as $160/mt ; they then entered a prolonged downtrend. In 2025, the annual average iron ore price was $102, down about 36% from the 2021 average. Source: SMM Iron ore prices have continued to fall in recent years, mainly due to the global project investment boom spurred by high prices before 2021. After 2024, multiple large iron ore projects worldwide entered a concentrated commissioning phase, and the market’s supply-demand pattern shifted from tight to loose, with the supply-demand gap widening from -12 million mt to 46 million mt. Meanwhile, China has implemented crude steel production cuts since 2022, significantly curbing iron ore demand. Coupled with persistent weakness in real estate, an overall downturn in the steel industry, and an overseas economic slowdown, among other factors, iron ore demand declined markedly. Entering 2025, a rebound in China’s steel exports drove iron ore demand to increase slightly, while capacity in emerging steel-producing countries such as Southeast Asia was gradually released, narrowing the supply-demand gap somewhat. Over the long term, however, iron ore supply is still on a growth trend, market expectations remain bearish, and prices are pressured to set new lows repeatedly. Source: SMM (the forecast assumes an extreme balance under normal commissioning of new mines and no voluntary production cuts by mines) II. Mine Costs Form a Solid Bottom Support for Iron Ore Prices From the global iron ore cost curve, about 90% of global mine cash cost is no higher than $85/mt, and about 93.8% is no higher than $90/mt. International mining giants represented by FMG, BHP, Rio Tinto, and Vale have costs far below those in China and other non-mainstream countries, forming the main body on the left side of the cost curve in the chart—low and relatively flat—which explains their strong cost competitiveness and earnings resilience in the global market. At present, the $85-90 cost line is the lifeline for the vast majority of mines; once prices remain below this range for an extended period, high-cost capacity will be forced to exit, thereby supporting prices. China’s iron ore mines due to low raw ore grade and high underground mining costs, among other reasons, currently have a nationwide per-mt processing cost of about 595 yuan/mt, equivalent to around $85 . Its costs have long been at the high end globally, serving as the "anchor point" and "ceiling" of the cost curve. The high cost and low production of China's domestic iron ore mines have led the steel industry to heavily rely on imports for raw materials, and fluctuations in international ore prices directly impact the profit stability of the domestic steel industry. Therefore, promoting domestic resource supply, investing in low-cost overseas resources, and developing steel scrap recycling are crucial for the strategic security of China's steel industry. Data source: SMM III. The global iron ore supply has long been characterized by a landscape dominated by the "Big Four" mines, supplemented by "non-mainstream" mines. Currently, the iron ore production industry is highly concentrated, primarily following a pattern dominated by the "Big Four" mines, supplemented by "non-mainstream" mines. Australia and Brazil have long contributed over half of the global iron ore production. Australia, leveraging advantages such as high resource concentration, low mining costs, and stable supply, firmly holds its position as the world's largest producer and exporter; while Brazil is renowned for its high-grade ore and is the world's second-largest iron ore exporter. Data source: SMM The "Big Four" mines, consisting of Rio Tinto, BHP, FMG, and Vale, have long dominated global iron ore supply, accounting for approximately 70% of global production. Data source: SMM The Rise of Emerging Mines Promoting the Multipolar Development of Global Iron Ore In recent years, India has actively promoted domestic mining development, leading to a significant increase in production; since 2023, its iron ore production has surpassed that of China, and it shows a continuous expansion trend, maintaining an annual growth rate of 7%, gradually becoming a new force in regional supply growth. Emerging enterprises such as India's National Mineral Development Corporation (NMDC) and South Africa's Anglo American are gradually expanding capacity, enhancing their influence in the international market. Meanwhile, countries such as Russia, Kazakhstan, Iran, and regions in Africa are also actively developing domestic iron ore resources, seeking to increase their voice in regional markets, driving the global iron ore supply landscape from high concentration towards gradual multipolar development. Data source: SMM IV. Australia Firmly Holds the Top Spot, India Becomes a New Growth Engine From the perspective of major producing countries, Australia still firmly ranks first globally, with iron ore production of approximately 900 million mt in 2025, accounting for one-third of the global total, and maintaining a stable annual growth rate of about 2%. Brazil ranks second; after the 2019 dam collapse, production once fell sharply. Although it has recovered somewhat over the past two years, the increase has been relatively limited. China’s production scale is relatively large, but due to frequent safety incidents and the continued impact of the environmental protection-driven production restriction policy, production has not increased but instead declined in recent years. By contrast, India, as an emerging producer, has seen production rise steadily over the past decade, and is expected to post an increase of about 7% by 2030. Source: SMM V Over the next three years, the world will usher in a new peak in mine commissioning In addition to supply from existing mines, there are currently multiple large-scale iron ore projects under construction worldwide, with the number of mines expected to be commissioned in 2026 at six, mainly located in Africa and Brazil. Representative projects include Vale’s northern expansion “S11D +20mtpa,” the northern block of Guinea’s Simandou iron ore project, and the Nimba iron ore project. 2026 will be the year with the most concentrated new supply over the next three years. With the northern block of Simandou officially commencing production, the overall capacity ceiling of the mining area will, with capacity ramp-up, rise to 120 million mt, becoming the core incremental source of global iron ore supply over the next five years. From 2027 to 2028, projects expected to commence production will mainly come from China, including the Xi’an Mountain iron ore mine and the Honggenan iron ore mine, adding about 25 million mt of iron ore supply to the domestic market. Overall, as emerging producers continue to release capacity, and traditional suppliers such as Australia and Brazil consolidate their export advantages through expansion projects, the global iron ore supply structure will become more diversified. A new cycle of capacity release has gradually begun, and the loose supply landscape is expected to continue deepening over the next several years. Source: SMM Simandou Project Commissioning Reshaping the Global Iron Ore Supply Landscape Among the many new projects, Africa’s Simandou iron ore is particularly noteworthy. The mine is expected to reach annual capacity of 120 million mt, and the ore’s average grade exceeds 65%, providing the market with a high-grade, high-quality option beyond Australia and Brazil, and becoming an important variable in the recent contest over the global iron ore supply landscape. In terms of project progress, the Simandou iron ore project has entered a substantive shipment phase; as logistics corridors are gradually opened up, the mining area’s substantive impact on global supply will gradually become evident. Source: SMM Nearly 400 million mt of Capacity Release by 2030, Global Iron Ore Market Faces Impact With the entry of emerging producers, iron ore supply is beginning to diversify. Projects led by Simandou iron ore are breaking the industry landscape and taking the iron ore market into a new stage. Looking ahead to the next five years, global iron ore capacity is expected to see a wave of concentrated releases, with incremental supply mainly coming from two major regions: Africa and Australia . Leveraging the development of new high-grade mines such as Simandou, Africa is reshaping the global supply landscape; meanwhile, Australia, relying on its existing capacity base and ongoing expansion projects, is further consolidating its export-dominant position. Overall, the global iron ore supply landscape is evolving toward greater diversification and a looser market. Source: SMM VI Simandou High-Quality Iron Ore Enters the Market; Global Iron Ore Enters an Era of “Quality Upgrading” As some older mines gradually enter a period of resource depletion , coupled with the fact that many newly commissioned projects are dominated by mid- to low-grade ore, the average global iron ore grade shows a downward trend from 2025 to 2026 . However, as high-grade mines such as Simandou are commissioned one after another, the share of high-grade ore supply is expected to increase, and is projected to drive a rebound in the overall global iron ore grade in 2027. Source: SMM VII “Green Steel” Reshapes the Global Crude Steel Production Landscape From a policy perspective, the low-carbon transition represented by “green steel” is profoundly reshaping the global crude steel production landscape . Whether in China or Europe, carbon neutrality has become the core theme for the future development of the steel industry. Therefore, whether it is China’s ongoing capacity replacement policy or the EU’s Carbon Border Adjustment Mechanism (CBAM) that is about to be fully implemented , both clearly indicate that the global steel industry is accelerating its transition toward low-carbon and green development. Achieving carbon neutrality across the entire industry chain is no longer an isolated task for a single link, but must rely on close upstream-downstream coordination and deep integration of technological pathways. Source: SMM Technology Reshaping: Green Iron Supply + Green Production Demand Against the broader backdrop of carbon neutrality, merely maintaining the current supply-demand structure dominated by iron ore can no longer meet future low-carbon requirements. The deeper need of industry transformation lies in reconstructing metallurgical processes: resource-rich countries—such as Australia and Brazil, traditional major iron ore exporters—need to fully leverage their renewable energy endowments and mineral advantages, shifting from simply exporting iron ore to producing high-grade, low-carbon-footprint direct reduced iron (DRI) or hot briquetted iron (HBI) and other high value-added intermediate products. By shipping this clean-energy-driven “green DRI” to steel consumption hubs and integrating it with local green electric arc furnace (EAF) processes, it can effectively replace the traditional “blast furnace–converter” long process, thereby substantially reducing carbon emissions at the source. This multinational collaborative model of “high-quality resources + green energy + short-process” is not only a critical measure to address trade barriers such as the Carbon Border Adjustment Mechanism, but also an essential pathway to build a new global green steel supply chain and drive deep decarbonization across the industry. Data source: SMM Rising Share of Electric-Furnace Steelmaking, Stronger Substitutability of Steel Scrap, Squeezing Iron Ore Demand Driven by carbon-neutrality targets, the steel industry, as a major source of carbon emissions in the industrial sector, has drawn close attention for its emissions-reduction pathway. Among these, the traditional long-process route centered on “blast furnace–converter,” due to its heavy reliance on coke and iron ore, is regarded as a primary source of carbon emissions and has therefore become a key focus of regulation and retrofitting in various countries. By contrast, the short-process route represented by “steel scrap–electric furnace,” with a significantly lower carbon-emissions intensity, is being favoured by an increasing number of countries. This structural shift has driven the share of electric-furnace steelmaking in global crude steel production to continue rising. Data source: SMM From an economic perspective, the substitution relationship between steel scrap and pig iron is typically measured by the price spread. Generally, after factoring in steelmaking costs and losses, pig iron costs should be about 100-150 yuan/mt higher than steel scrap prices ; this range is viewed as the cost-performance equilibrium band: if steel scrap prices are lower than pig iron costs by more than this threshold, steel scrap is more economical; otherwise, pig iron has a more pronounced advantage. In 2025, the average price spread between pig iron and steel scrap was 122 yuan/mt, lower than the 2024 average of 211.8 yuan/mt, and also largely within the cost-performance equilibrium band. By contrast, the 2024 spread was significantly above the upper limit of the equilibrium band, indicating that steel scrap offered a more prominent cost-performance advantage at that time. After the spread narrowed in 2025, the economic advantage of steel scrap weakened somewhat. As a result, in the short term, there is limited room for China to increase the share of electric-furnace steelmaking; overall, it remains at a relatively low level and still lags far behind the global average. This also reflects that, at the current stage, cost factors still impose a substantive constraint on the choice of smelting process routes. Data source: SMM Taken together, the blast furnace–converter long-process route will remain the dominant model for global steel production over the next five years, but the shares of electric furnaces and steel scrap usage will increase year by year; in the long run, this trend will suppress iron ore demand, causing it to weaken gradually. Data source: SMM VIII Global Total Iron Ore Demand in 2030 to Be About 2.4 Billion mt, with Gradual Shifts in Global Flows As China began encouraging domestic steel mills to develop overseas markets while adjusting the domestic industry chain’s transformation toward producing high value-added products needed by the manufacturing sector, global crude steel production began to rebound gradually. Data Source: SMM From the perspective of the global demand structure, although crude steel production outside China is entering a new round of development, with capacity expansion particularly notable in regions such as India and Southeast Asia, a considerable portion of the incremental increase comes from electric furnace processes, providing limited substantive boost to iron ore demand. Meanwhile, as the world’s largest iron ore consumer, China’s crude steel production has entered a downward trajectory, constituting the primary source of demand-side reductions. Overall, overseas increments are unlikely to fully offset China’s reductions. It is expected that by 2030, total global iron ore demand will be approximately 2.4 billion mt, with overall growth trending toward a slowdown. Compared with the mild growth on the demand side, the supply side remains in a phase of continuous expansion. The oversupply landscape will become an important factor that suppresses ore prices over the long term. Data Source: SMM SMM will continue to track the impact of changes in iron ore supply and demand on prices. Comments are welcome—scan the code to follow us! Data Source Statement: Except for publicly available information, all other data are processed and derived by SMM based on publicly available information, market communication, and SMM’s internal database models, for reference only and not constituting decision-making advice. Scan the code to access information for free

This week (December 12-18, 2025), industry dynamics indicated that solid-state batteries had moved beyond the long-term conceptual incubation phase and were entering an industrialization tipping point, driven by the dual engines of "mass production validation of materials" and "anchoring in vehicle applications." The core industry challenge shifted from "whether a sample can be produced" to "whether stable, economical, and automotive-grade mass production can be achieved." Upstream raw material prices maintained a slight downward trend, with key material prices such as lithium sulfide, LATP, and LPSC pulling back. Shipments remained stable, with current demand primarily concentrated in downstream validation and small-volume battery sample applications.

The Australian Renewable Energy Agency (ARENA) will invest up to A$45 million in Fortescue’s Solar Innovation Hub in the Pilbara region of Western Australia, aiming to lower the levelized cost of utility-scale solar power and accelerate its large-scale deployment. The Hub will act as a 500-megawatt test bed for new solar technologies within Fortescue’s planned 1.5-gigawatt solar PV development pipeline. It will trial up to 10 projects under a single funding agreement, testing a range of innovations to reduce costs, demonstrate technical and commercial feasibility, and share outcomes across the renewable energy industry. The plant will become the key support for FMG’s iron ore production expansion as well as their green energy transition.

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[SMM Magnesium Express] Australia's Latrobe Magnesium has commenced MgO production at its demonstration plant, marking a key breakthrough in its patented process. The company is advancing toward commercial operations with first deliveries scheduled to offtake partners.

【SMM Nickel Market Flash】Project Nickel LLC, a ten percent owner of MGT Capital Investments (NASDAQ:MGTI), has significantly increased its holdings in the company. According to a filing dated September 22, Project Nickel LLC acquired 500 million shares of common stock and a secured convertible note reportedly valued at $1.22 billion. The transaction is notable given that MGT Capital Investments is a micro-cap company with a market capitalization of approximately $750,000 that has been facing financial challenges. Project Nickel LLC also converted preferred stock into 650 million common shares, further solidifying its position in the investment firm.