Iron Ore Slips on Weak Fundamentals

Iron ore futures dropped to CNY 750 per ton, giving back part of the previous session’s advance after Chinese authorities ordered steel mills in Northern China to temporarily reduce output to curb pollution during the annual meetings of the National People's Congress. Under the “blue skies” directive, mills were instructed to cut blast furnace production by 30% for one week starting March 4 to limit emissions in Beijing during the high-profile political gatherings. Analysts expect steel demand to weaken in the first half of the year amid ongoing property sector fragility and cautious industrial activity. Oversupply pressures also lingered, with iron ore inventories at major Chinese ports climbing to their highest levels since February 2022. Meanwhile, traders continued to evaluate the fallout from the US Supreme Court’s tariff ruling, which could spur additional protectionist measures and potentially disrupt global trade flows.

Iron ore futures climbed above CNY 750 per ton in late February, rebounding from seven-month lows as economic activity in China picked up following the long holiday, with steel mills expected to ramp up output. Still, analysts project that China’s steel demand will contract in the first half of the year, potentially limiting the scope for sustained price gains. Oversupply concerns also persisted, as iron ore inventories at Chinese ports rose to their highest level since February 2022. Market participants are assessing the implications of the US Supreme Court’s tariff ruling, which could prompt further protectionist measures and weigh on global trade flows. In corporate developments, Fortescue reported a 23% increase in first-half profit, supported by record iron ore shipments and firmer realized prices. Separately, Australia is closely monitoring negotiations between major iron ore producers and China’s state-backed buyer, given the potential fiscal implications of lower ore prices.

Iron ore futures remained below CNY 750 per ton in late February, hovering at seven-month lows as mainland China markets reopened after the long Lunar New Year break. Trading on the DCE and SHFE was suspended from February 16 to 23 for the holidays, while equivalent contracts in Singapore declined over the same period. Meanwhile, industry data showed iron ore arrivals at major Chinese ports fell by 1.7 million tons in the latest week, offering some potential price support. Demand for the steelmaking raw material is expected to improve as economic activity in China resumes. Separately, Australia is closely monitoring negotiations between leading iron ore producers and China’s state-backed buyer, given the potential budgetary impact of lower ore prices. Iron ore is Australia’s top export commodity, and mining-related tax revenues remain a key pillar of federal finances.