Iron Ore Retreats on Weak Steel Demand

Iron ore futures slipped below CNY 815 per ton, pulling back from their highest levels in nearly two years as a seasonal slowdown in steel demand pressured feedstock prices. Domestic steel consumption in China continued to face headwinds from sluggish construction activity and broader economic uncertainty, while demand for Chinese steel exports also weakened as overseas buyers showed limited willingness to purchase at elevated prices. On the supply side, industry data indicated that iron ore inventories at Chinese ports stood at roughly 167 million tons in March, up 14.2% from a year earlier and remaining at record-high levels. Meanwhile, the massive Simandou iron ore project reported record shipments of 1.2 million tons in April. Globally, iron ore shipments increased 7% in April 2026 compared with the same month last year, adding further pressure to the market.

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.