Iron Ore Slides for Fourth Straight Session

Iron ore futures fell to around CNY 710 per ton, declining for a fourth consecutive session as worsening profitability at steel mills continued to weigh on the demand outlook for the key steelmaking ingredient. Industry data showed that steel mill profitability in China dropped sharply to 7.79% in the latest week, as persistently high coke prices continued to squeeze margins. Chinese steel demand also weakened further in the third quarter amid an ongoing slowdown in construction activity. Meanwhile, overseas steel demand remained relatively resilient but showed signs of a delayed recovery. Iron ore inventories at major Chinese ports fell nearly 1% to 151.29 million metric tons last week, providing some support to prices. There were also signs of restocking, with steel mills’ imported iron ore inventories rising by 1.41 million metric tons to 90.44 million metric tons over the same period.

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.