Iron Ore Weakens Despite China Stimulus

Iron ore futures rose above CNY 700 per ton, recovering slightly from eight-week lows after data showed China’s manufacturing sector returned to growth in September, improving the demand outlook in the world’s largest metals consumer. China also introduced measures to direct lower-cost credit toward sectors including infrastructure and technology, while increasing support for homebuyers as part of efforts to strengthen economic growth. Meanwhile, investors prepared for China’s weeklong National Day holiday, which is expected to bring lower trading volumes and reduced economic activity during the period. The ferrous metals market also remains under pressure from weakening steel demand and deteriorating profitability among mills. The China Iron and Steel Association has called on steelmakers to cut production and reduce inventories to protect margins and curb excess supply. Chinese markets will be closed from October 1 to October 7.

Iron ore futures in China slipped to around CNY 700 per ton on Tuesday, hitting eight-week lows as ample global supply and weakening steel demand pressured the market. Industry data showed iron ore inventories at major Chinese ports increased last week, while overseas shipments have recovered to elevated seasonal levels, easing previous supply-side disruptions. Meanwhile, profitability at Chinese steel mills declined again last week, while average daily hot metal output also fell. The China Iron and Steel Association has urged mills to reduce production and draw down inventories to protect margins and limit excess supply. Separately, World Steel Association data showed global crude steel production fell 1.2% to 144.2 million tons in August from a year earlier. Elsewhere, industrial profits in China slowed in August as weak domestic demand outweighed strength in high-tech and AI-related manufacturing, further weighing on the overall demand outlook.

Iron ore futures in China traded below CNY 715 per ton, hovering near one-month lows as weak fundamentals continued to weigh on the market. Supply remained ample, with shipments from top producer Australia rising above 21 million tons week-on-week, contributing to elevated port arrivals. Industry data also showed that iron ore inventories at seven major ports in Australia and Brazil increased by 258,000 tons to 11.95 million tons last week. Meanwhile, Chinese steel mills continued to face widening losses, largely due to elevated coking coal prices as safety inspections and mine suspensions in Shanxi restricted domestic supply. Softer demand from China’s construction and manufacturing sectors has also weighed on purchases of ferrous metals. However, iron ore prices remain supported by expectations that Chinese steel mills will step up restocking ahead of the extended Golden Week holiday in early October.