Citi's outlook for iron ore, coal, copper, lithium and gold
Citi cut its lithium price outlook by 15-20% over the next three years and remains cautious on gold and iron ore.
Source: iStock
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KEY POINTS
- Citi expects iron ore prices to remain under pressure in a narrow US$90-$100 range due to China's struggling property market and weakening manufacturing, with analysts cutting their near-term target to US$90 from US$100.
- Copper faces potential retreat to US$8,800 per ton if expected US Section 232 import tariffs are implemented, though any eventual tariff rollback could present a strategic buying opportunity for medium-term investors.
- Australian premium hard coking coal shows surprising resilience with price targets raised to US$170 per ton from $160, supported by supply disruptions despite broader steel market weakness.
- Gold price targets have been lowered significantly, with near-term expectations cut to US$3,300 per ounce from US$3,500, as analysts suggest the highs around US$3,500 in late April may represent the peak.
- Lithium continues facing oversupply pressures with spodumene targets cut to US$600 per ton from US$700, as excess supply and inventory buildup in China create large market surpluses.
Commodity markets are facing a period of uncertainty as China's economic slowdown and escalating trade tensions reshape global demand patterns, according to Citi.
The investment bank issued a quarterly commodity update on Monday, which featured updated price forecasts for several key commodities, and target updates for related miners.
Iron Ore Under Pressure
Iron ore prices are expected to trade in a narrow US$90-$100 per ton range with a downward bias, with the analysts cutting their near-term target to US$90 from US$100.
Singapore iron ore futures 12-month price chart (Source: TradingView)
The pessimism stems largely from China's struggling property market and weakening manufacturing activity facing increased trade headwinds. Steel mills in China are expected to reduce output through maintenance activities during the summer seasonal lull, dampening iron ore demand.
However, elevated Chinese steel exports and cost support are likely to prevent steep price declines. The market is expected to remain largely balanced in 2025, with new supply from the Simandou project unlikely to significantly impact balances this year.
China's crude steel output is forecast to fall 1.5% year-on-year, while global production is expected to remain broadly flat. The implementation of potential supply-side reforms in China could further pressure demand and widen iron ore surpluses.
Coking Coal Shows Resilience
Australian premium hard coking coal has demonstrated surprising strength despite weakness across other steel-related commodities. Analysts raised their near-term price target to US$170 per ton from $160, citing supply disruptions that have tightened availability of Australian cargoes.
Indian steel mills have largely restocked, providing short-term support. However, as both China and India enter their off-season, demand is expected to slow. The outlook for the fourth quarter remains more optimistic, with prices potentially moving higher as steel mills restock ahead of winter.
Copper Faces Trade Policy Uncertainty
Copper presents a more complex picture, with analysts maintaining a medium-term bullish stance despite near-term headwinds. Prices could retreat to US$8,800 per ton (US$3.99/lb) in the third quarter if Section 232 US import tariffs are implemented as expected.
Until then, elevated US copper imports are likely to support prices around US$10,000 (US$4.53/lb) by reducing available supply and exacerbating physical tightness in non-US markets. Any eventual tariff rollback could present a strategic buying opportunity for medium-term investors.
Copper CFDs 12-month price chart (Source: TradingView)
Aluminum and Lithium Navigate Different Challenges
Aluminum prices are expected to trade around US$2,450 per ton near-term, reflecting a broadly balanced market. While seasonal demand weakness in China poses short-term risks, strong decarbonisation-driven demand supports the medium to long-term outlook.
Aluminium 12-month price chart (Source: TradingView)
Lithium faces more significant challenges, with analysts maintaining their price target of US$7,000 per ton for lithium salts but cutting spodumene targets to US$600 per ton from US$700. Excess supply and inventory buildup in China continue to pressure prices, with the market building large surpluses over the past two to three years.
Gold Targets Reduced
Gold has seen its price targets lowered, with analysts cutting near-term expectations to US$3,300 an ounce from US$3,500, and longer-term targets to US$2,800 from US$3,000. The precious metal is expected to consolidate around US$3,100-$3,500 as markets digest US policy changes and geopolitical risks.
However, analysts suggest the highs around US$3,500 seen in late April may already represent the peak, as the gold market deficit appears to be peaking and household holdings have reached record levels.
Gold 12-month price chart (Source: TradingView)
The commodity complex faces a challenging period ahead, with China's economic transition, US trade policy uncertainty, and shifting global demand patterns creating a complex investment landscape that will require careful navigation.
