Although iron ore prices have rebounded sharply and entered a technical bull market, research institutions remain bearish on its outlook.

Capital Economics believes that, as the surge in low-cost supply continues to drive an even larger oversupply, iron ore prices may fail to hold above $40 per ton in the second half of this year.

According to Bloomberg News, Caroline Bain, senior commodity economist at Capital Economics, said on Friday that the supply surplus will become more pronounced over the next six months. Even if China, the world’s largest consumer, boosts consumption—which could increase its demand for iron ore—Australian and Brazilian iron ore will continue to flood into the international market, putting further downward pressure on prices.

People will realize that the supply shortage seen in the second quarter was only temporary, and iron ore prices will experience a significant drop in the second half of the year. Investor sentiment will once again reverse, turning bearish on iron ore. This could push prices down below $40.

Caroline Bain It is expected that iron ore prices will fall to $45 per ton by the end of this year.

However, at present, iron ore prices remain in a rebounding range and are poised to post their first quarterly increase since 2013. Iron ore prices had fallen to a ten-year low in early April, but in the second quarter, prices have accumulated a gain of 21%, meeting the technical definition of entering a bull market—a 20% rise.

KaiTu Macro is not the only institution that is bearish on the outlook for iron ore prices; other institutions, including Goldman Sachs and Citigroup, share this view. All these research firms believe that this round of price rebound will not last. In a research report released last week, Goldman Sachs projected an average iron ore price of $49 per ton for the third quarter and $48 per ton for the fourth quarter.

The continued large-scale influx of seaborne iron ore supplies will be the primary factor driving future price declines. Australia and Brazil account for 80% of global seaborne iron ore exports.

One of the main factors driving up iron ore prices in the second quarter was the decline in China's iron ore port inventories. According to data from Shanghai Steel Home, total inventories at China's major ports fell by 2.1% last week to 80.3 million tons—the lowest level since November 2013.

China has introduced an increasing number of stimulus measures to halt the economic slowdown. On the 27th, the People's Bank of China announced targeted reserve requirement ratio cuts and interest rate reductions, with the benchmark interest rate even falling to its lowest level on record, in order to support economic growth and address the sharp plunge in the stock market.

The price of iron ore with a 62% grade shipped to Qingdao Port in China closed at $62.01 per ton last Friday, marking a significant rebound from the decade-low of $47.08 reached on April 2.