The iron ore price is trading around a two-year low of US$90.95 per tonne on Tuesday, according to Trading Economics.
Iron ore has fallen 6.7% over the past month and 15.1% in the calendar year to date (YTD).
The iron ore price impacts the earnings and, thus, valuations of the major ASX 200 iron ore shares, but not as much as it used to.
That's because three of the four majors have significantly diversified themselves, primarily into copper and/or lithium in recent years.
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What's happening with ASX 200 mining shares today?
The BHP Group Ltd (ASX: BHP) share price is $59.37, down 2.3% over the month and up 30% YTD.
The Rio Tinto Ltd (ASX: RIO) share price is $153.79, down 7.4% over the month and up 4% YTD.
Iron ore pure-play Fortescue Ltd (ASX: FMG) is $15.27 per share, down 8.6% over the month and down 31% YTD.
The Mineral Resources Ltd (ASX: MIN) share price is $44.64, down 16.3% over the month and down 19% YTD.
Experts say today's new mining boom is substantially different to the 2000s because it's led by critical minerals, not iron ore.
The iron ore price rose just 7% in FY26 while other metals and minerals relevant to the energy transition skyrocketed.
The outlook for the iron ore price over the next five years is rather bleak.
Iron ore price to tumble 20% over 5 years
The Federal Department of Industry, Science, and Resources has just published its 5-year outlook for commodities.
The department expects the iron ore price to average US$83 per tonne in FY27, down from US$92 per tonne in FY26.
Looking ahead, it expects the iron ore price to drop to an average US$72 per tonne in FY31.
That's 21% lower than today.
The department says the primary force driving down the iron ore price will be changed supply and demand dynamics.
According to the department's report:
Iron ore prices are forecast to fall as global supply rises and demand weakens.
This is expected to reduce Australia's export earnings from $107 billion in 2026–27 to $96 billion in 2027– 28 and $79 billion by 2030–31 …
In 1H FY26, steel production weakened in China, which imports 75% of the world's iron ore, as well as Russia, and the Middle East.
Steel production directly affects the iron ore price because iron ore is the main raw material used to make steel.
Meanwhile, the global supply of iron ore increased, particularly from Australia, Brazil, Guinea's Simandou project, and South America.
Simandou is the world's largest undeveloped high-grade iron ore deposit.
It is majority-owned by Chinese investors, but Rio Tinto also has a stake.
The department said:
Simandou mines in Guinea — Africa's largest high-grade iron ore deposit — are beginning to add a more visible source of supply-side pressure to the global seaborne iron ore market.
Shipments from Simandou began to ramp up from the September quarter, with volumes expected to rise noticeably as mine, rail and port operations scale toward full capacity.
While the ramp-up is likely to be uneven, the arrival of high-grade Simandou ore adds to already ample global supply and, over time, could increase competitive pressure on higher-cost and lower-grade producers.
Between FY27 and FY31, the department forecasts gradually rising global supply and lower Chinese demand due to weaker steel output.
Australian iron ore export volumes are expected to peak over the next two years as new supply comes online.
Exports will then ease as China's demand weakens and new supply from Africa and Brazil increases competition…
The department expects Australian iron ore export earnings to fall from $123 billion in FY26 to $79 billion in FY31.
That's a 35% drop in five years.
This will be driven by a lower iron ore price, lower volumes, falling ore grades, and a stronger AUD/USD exchange rate.
Check out the official price forecasts for 9 other commodities, including copper and lithium, here.
