Global seaborne iron ore market: Goldman Sachs lifts the iron ore marginal cost estimate to about US$95/t as freight and mining costs rise

Overview

This report updates Goldman Sachs' global, contestable, grade- and quality-adjusted seaborne iron ore cost curve. It argues that higher operating and freight costs have materially raised marginal supply costs, creating support near US$90–95/t even as the market balance becomes softer in late 2026 and additional supply enters in 2027.

Core views

Goldman Sachs estimates that the 90th-percentile marginal cost on its grade-adjusted, all-in global seaborne iron ore cost curve has risen by more than 20% over two years to about US$95/t, from about US$75/t in 2024. The increase reflects higher mining costs, sustaining capital expenditure, weaker product grades and higher freight rates. Brazil-to-China freight has doubled to roughly US$40/t, while oil, diesel, labour and shipping costs have also increased. The report estimates that more than 200Mt of supply is cash-negative at or below US$95/t on a 61% Fe-equivalent basis, including approximately 25Mt of low-grade Indian exports and high-cost supply from Australia, Brazil, Canada, Ukraine and West Africa. More than 350Mt is estimated to be cash-negative at or below US$90/t. Vale's long-term lower-cost freight contracts are noted as a differentiating factor. The report describes the recent decline in iron ore prices to about US$95/t, after an average of about US$105/t over the prior two to three years, as the result of a more balanced market. The balance has shifted because Chinese steel production and direct and indirect steel exports have moderated, while seaborne supply from large Australian and Brazilian producers has improved, Simandou is adding new supply, and China Mineral Resources Group negotiations remain relevant to market conditions. For the near term, Goldman Sachs views September support for Chinese steel production and demand ahead of the early-October Golden Week holiday, together with CMRG negotiations with FMG and Rio Tinto, as creating temporary tightness. It considers September likely to be the strongest near-term period for iron ore. From October to November, the institution expects Chinese steel output and iron ore demand to soften while low-cost exports from Rio Tinto, Vale and BHP, as well as Simandou supply, increase. Shanxi coking-coal shortages are also expected to pressure steel-mill profitability. Nevertheless, the higher cost curve leads Goldman Sachs to view US$90–95/t as solid downside support at current high freight rates; production cuts announced by Usiminas and Itaminas are cited as evidence that high-cost supply is already under pressure. For 2027, Goldman Sachs forecasts higher Simandou production, with full ramp-up above 100Mtpa during 2028, little growth in Australian and Brazilian shipments, continued mine depletion, rising Indian imports, and broadly stable Chinese iron ore demand and imports. These factors underpin its US$96/t forecast for 61% Fe iron ore in 2027. Over the longer run, it expects Simandou to flatten the cost curve only modestly because mine depletion is estimated at about 1Bt over the next decade and falling grades have an estimated ~50Mt impact. The contestable seaborne market is still expected to be about 2Bt in 2030. The long-run 61% Fe benchmark forecast remains about US$85/t in real terms, equivalent to US$95–100/t nominal.

Analysis framework

Goldman Sachs rebuilds a proprietary global contestable seaborne iron ore cost curve using company cost data, grade and quality adjustments, freight and shipping rates, royalties, and sustaining-capital assumptions. It then compares supply-cost positions with expected demand, producer shipments, inventories, product premiums and discounts, and mine-depletion trends to frame near-term support and longer-term price forecasts.

Methodology notes

• Industry AnalysisCost curve analysis

  Grade- and quality-adjusted all-in iron ore cost curve

  The report ranks contestable seaborne supply by all-in cost, adjusted for ore grade and quality, to estimate the marginal cost and identify volumes that become cash-negative at different benchmark prices.

• Industry AnalysisSupply-demand framework

  Seaborne iron ore supply-demand balance

  The report links Chinese steel demand, major-miner shipments, Simandou ramp-up, inventories and mine depletion to its price outlook.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Cost transmission from oil, diesel and freight into mining economics

  Higher fuel and shipping costs raise producers' all-in costs and therefore the estimated marginal price needed to sustain higher-cost supply.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Vale

  Major seaborne iron ore producer with relatively lower freight exposure through long-term contracts.

  Strengths

  The report notes that Vale has long-term lower-cost freight contracts.

  Comparison

  Its freight position differs from producers exposed to elevated spot freight rates.

• BHP, Rio Tinto and FMG

  Major Australian suppliers whose exports and China inventory positions are relevant to the late-2026 market balance.

  Strengths

  They are identified as low-cost seaborne suppliers.

  Comparison

  Their expanding exports contrast with high-cost supply that may become cash-negative at lower prices.

  Risks

  Higher exports contribute to the expected October–November supply increase.

• Simandou

  New West African supply source expected to increase seaborne iron ore availability.

  Strengths

  Expected to exceed 100Mtpa at full ramp-up during 2028.

  Comparison

  Its new supply is expected to flatten the global cost curve only slightly.

  Risks

  Its ramp-up contributes to supply growth in 2027 and beyond.

Key data

• 2026 marginal cost~US$95/t90th-percentile marginal cost on a grade-adjusted all-in basis; up from ~US$75/t in 2024.
• Cash-negative supply at US$95/t>200MtOn a 61% Fe-equivalent basis; includes ~25Mt of low-grade Indian exports and high-cost supply from several regions.
• Cash-negative supply at US$90/t>350MtGoldman Sachs estimate on its cost curve.
• Brazil-to-China freight~US$40/tThe report states this rate has doubled.
• Near-term support rangeUS$90–95/tGoldman Sachs' cost-curve-based downside support view at current high freight rates.
• 2027 61% Fe price forecastUS$96/tForecast supported by stable Chinese demand, mine depletion and limited Australian/Brazilian shipment growth, despite higher Simandou output.
• Simandou ramp-up>100Mtpa during 2028Expected full-ramp production level.
• 2030 long-run 61% Fe forecast~US$85/t real; US$95–100/t nominalLong-run benchmark forecast.
• Mine depletion~1Bt over the next decadeStructural support factor for the seaborne market.
• Contestable seaborne market in 2030~2BtGoldman Sachs' expected market size.

Impact & implications

The report's central implication is that high freight, fuel, sustaining-capital and grade-related costs raise the iron ore price required to keep marginal supply operating. This may limit downside near US$90–95/t in the near term, even though Goldman Sachs expects a softer late-2026 balance as Chinese demand cools and low-cost supply expands. Over the longer term, mine depletion and declining grades are expected to offset much of the cost-curve flattening from Simandou.