Iron Ore Slips on Weak Fundamentals

Iron ore futures fell below CNY 680 per ton, sliding toward four-year lows as rising port inventories, subdued steel mill profitability and sluggish demand continued to pressure prices. Industry data showed that iron ore stockpiles at major Chinese ports increased nearly 1% to 153.72 million tons in the latest week, while shipments from producers outside Australia and Brazil remained elevated. Meanwhile, profitability among Chinese steelmakers remained subdued at 11.26%, unchanged from the previous week. Environmental restrictions across several northern Chinese provinces also continued to weigh on hot metal production, although output is expected to recover once the curbs are lifted. Elsewhere, Brazilian mining giant Vale reported a 20% decline in third-quarter core profit, reflecting the impact of lower iron ore prices and persistently high fuel and freight expenses.

Iron ore futures climbed above CNY 680 per ton, recovering from four-year lows amid signs of strengthening demand in top consumer China. Industry data showed that China’s average daily hot metal output, a key indicator of iron ore demand, increased by 3,700 tons to 2.36 million tons, marking a second consecutive weekly gain as blast furnaces resumed operations following maintenance. The operating rate of blast furnaces across surveyed mills also rose by 0.14 percentage points week-on-week to 87.3% as of October 28. Meanwhile, freight rates on both Australia-China and Brazil-China routes continued to rise, providing further support for iron ore prices. However, Chinese steel mills remain unprofitable, and domestic steel demand remains weak. Robust global iron ore production could also constrain further price gains.

Iron ore futures recovered to above CNY 670 a ton after touching a four-year low of CNY 664 on October 27, as the return of steelmaking capacity provided some support despite concerns over rising supply. Hot metal production, a key indicator of iron ore demand, fell by 89,900 tons week-on-week to 1.75 million tons in the week ending October 24, largely due to blast furnace maintenance. Output is expected to decline further before recovering as furnaces resume operations. However, the improvement in production may offer limited support to prices, as steel mills continue to operate at a loss and demand for steel remains weak. On the supply side, iron ore arrivals at Chinese ports are expected to rebound after weather disruptions caused by typhoons along the eastern coast reduced deliveries last week. Although global shipments eased slightly, they remained seasonally high, increasing the risk of port inventories rebuilding and keeping prices under pressure in the near term.