Iron Ore Eases from 15-Month High

Iron ore futures in China eased to CNY 815 after testing the 15-month high of CNY 823 on May 11th as higher inventories momentarily offset the impact of strong demand from steelmakers. Industry data showed that iron ore inventories at Chinese ports were at around 167 million tons in March, a 14.2% annual increase to remain at the highest level on record. The ample availability matched a sharp rate of take-in from blast furnaces. The same industry reports pointed to a record level of operating rates in domestic blast furnaces, aiming to maintain elevated capacity levels as stimulus measures by the central government limited the impact of the prolonged property crisis on new construction. Second-hand home sales surged 72% annually during the May holiday. Stimulus expectations for the rest of the year were underpinned by the higher magnitude of special bonds by China's largest cities, which are commonly used to finance infrastructure projects.

Iron ore futures climbed above CNY 820 per ton, reaching their highest level since February last year as expectations for stronger steel demand gained traction in China. Steel production has remained stable while improving profitability at mills continued to support raw material demand. The stronger fundamentals were also reflected in steel prices, which have surged to their highest levels in more than nine months. Industry data further showed that blast furnace capacity utilization, a key indicator of iron ore consumption, remained close to 90%. Still, analysts cautioned that the seasonal slowdown in steel demand and softer downstream consumption could limit further gains in iron ore prices. On the supply side, weekly shipments from Australia and Brazil to China rose for a second consecutive week through May 3, with export volumes from Vale SA increasing sharply. The current quarter is typically the busiest shipping period for iron ore exports into China.

Iron ore futures rose above CNY 815 per ton, climbing toward their strongest levels since February last year and heading for a fourth consecutive weekly gain as firmer steel prices continued to support demand for the key steelmaking material. Analysts said stronger steel prices have improved profit margins for mills, encouraging greater iron ore purchasing activity. Prices were also supported by a continued decline in steel inventories, which have now fallen for seven straight weeks, signaling potential restocking demand for raw materials. On the supply side, Brazilian iron ore shipments increased to 34.57 million tons in April from 30.07 million tons a year earlier, highlighting ample global supply conditions. Meanwhile, mining operations resumed this week at two blocks of Guinea’s massive Simandou iron ore project, operated by a consortium led by Baowu Resources, after workers ended a strike.