Iron Ore Hits 5-Week High

Iron ore futures rose toward CNY 735 per ton, approaching five-week highs as elevated freight costs and expectations of pre-holiday restocking in top consumer China supported prices. Shipping costs remained elevated amid strong energy prices as the US and Iran exchanged strikes in the Middle East over the weekend, keeping supply risks high. Investors also anticipated that Chinese steel mills would rebuild iron ore inventories ahead of the National Day holidays in October, while hoping for a seasonal improvement in construction activity this month. Industry data showed average daily hot metal output, a key indicator of iron ore demand, edged higher last week after declining for two consecutive weeks. However, iron ore prices could face resistance as profit margins at Chinese steel mills continue to deteriorate.

Iron ore futures climbed toward CNY 730 per ton and were on track for a second consecutive weekly gain, supported by elevated ocean freight costs and expectations of pre-holiday restocking in top buyer China. Poor weather in the Pacific, higher oil prices, and increased transshipment volumes from Guinea have pushed up freight costs, providing support to iron ore prices. Industry data also showed that iron ore inventories at major Chinese ports declined in the latest week, marking a fourth consecutive weekly drop and signaling potential for restocking. Elsewhere, Brazilian miner Usiminas temporarily suspended operations at its Samambaia iron ore plant in Itatiaiuçu from September 2, citing weaker ore prices and sharply higher freight costs. Meanwhile, iron ore prices may face a ceiling as margins at Chinese steel mills continue to shrink.

Iron ore futures fell toward CNY 710 per ton in early September, retreating from one-month highs on expectations of strong supply in the second half of the year. Industry data showed global iron ore shipments increased by 2.73 million tons week-on-week to 35.72 million tons from August 24-30. However, iron ore arrivals at 47 Chinese ports fell by 7.66 million tons to 19.52 million tons over the same period. Global iron ore production growth is also expected to accelerate to an average of 2.2% a year over 2026-2030, up from 1.2% over the previous five years, lifting annual output to 3.04 billion tons by 2030, according to research firm BMI. Meanwhile, China’s total steel exports rose 7.8% week-on-week to 2.55 million tons in the week to August 31, marking a third consecutive weekly increase and the highest level in nearly eight weeks.