Iron Ore Extends Fall as Steel Margins Weaken

Steel rebar futures slipped toward CNY 3,060 per ton, reaching a three-week low as worsening profitability across China’s steel sector weighed on sentiment. Industry data showed that only around 8% of Chinese mills were profitable, down from roughly 30% a week earlier and 60% a year ago. The reading was also the weakest since September 2024, with persistently elevated coke prices continuing to erode margins. Meanwhile, China’s leading industry association reportedly called on steelmakers last month to voluntarily curb output, with the aim of reducing inventories and restoring profitability after a challenging first half. However, analysts see limited willingness among mills to implement substantial production cuts, particularly as steel demand shows signs of stabilizing. Despite the weak fundamentals, investors expect consumption to receive a seasonal boost during September’s peak construction period.

Iron ore futures fell below CNY 720 per ton, extending losses for a third straight session as weakening steel margins in China clouded the demand outlook for the key steelmaking ingredient. Industry data showed that only around 8% of Chinese mills remained profitable, down on both a weekly and annual basis from roughly 30% and 60%, respectively. The figure also marked the lowest level since September 2024, as persistently elevated coke prices continued to squeeze profitability. China’s state-owned iron ore importer, China Mineral Resources Group, has also reportedly 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 agreement with Brazilian miner Vale worth around US$3.5 billion to transport iron ore starting in 2030.

Steel rebar futures traded around CNY 3,105 per ton, hovering close to two-week lows as profitability across China’s steel industry 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. Meanwhile, China’s blast furnace utilization rate declined 0.48 percentage point week-on-week to 89.08%, while average daily pig iron production fell by 5,200 mt to 2.4028 million mt. Despite the weak fundamentals, investors expect steel consumption to improve on seasonal demand amid the peak construction period in September. In other news, China Mineral Resources Group, the country’s state-owned iron ore importer, has reportedly instructed several steel mills to avoid purchasing Rio Tinto Group’s Pilbara Blend ore.