Iron Ore Slips on Weakening China Demand

Iron ore futures slipped toward CNY 730 per ton, pulling back from six-week highs amid rising concerns over demand in top consumer China as steel margins continued to deteriorate. Industry data showed that only around 30% of steelmakers were profitable as of September 4, down from 32.5% a week earlier and 61% during the same period last year. Another report indicated that China’s blast furnace operating rate fell to 89.08%, down 0.48 percentage point week-on-week, while average daily pig iron output declined by 5,200 mt to 2.4028 million mt. China’s state-owned iron ore importer, China Mineral Resources Group, has also advised several steelmakers to avoid purchasing Rio Tinto Group’s key Pilbara Blend ore. Meanwhile, South Korean logistics and shipping company HMM signed a long-term shipping contract with Brazilian miner Vale worth around US$3.5 billion to transport iron ore starting in 2030.

Iron ore futures rose to around CNY 740 per ton, hitting six-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 continued exchanging strikes in the Middle East, 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. Australian miner Mineral Resources also expects iron ore prices to weaken in the second half of the year.

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.