Futures prices for iron ore in China reached about 705 yuan (approximately $101.5) per ton on Monday, close to their lowest level in the past 7 weeks. This price drop has been attributed to abundant global supply and reduced steel demand putting pressure on the market.
Increase in Iron Ore Inventories at Chinese Ports
Industry data shows that iron ore inventories at major Chinese ports increased last week. This comes as foreign shipments have returned to seasonal highs, alleviating previous supply disruptions. This situation, in turn, has impacted iron ore prices and is likely to lead to further price reductions.
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Declining Profitability in Chinese Steel Mills
Profitability in Chinese steel mills declined again last week, and daily hot iron production has also decreased. This trend has led the China Iron and Steel Association to urge mills to cut production and reduce inventories to maintain profit margins and limit excess supply. This action could help strengthen prices in the short term.
Separately, data from the World Steel Association indicates that global crude steel production in August fell by 1.2% compared to last year, reaching 144.2 million tons. This production decline reflects serious challenges in the global steel industry and its impact on prices and demand.
Decline in Industrial Profits in China
Additionally, industrial profits in China decreased in August. This decline has been attributed to weak domestic demand, which has affected production and sales capabilities. Meanwhile, demand in sectors related to advanced technologies and AI-related manufacturing remains strong, but this has not fully compensated for the overall demand weaknesses. This situation has negatively impacted the overall demand outlook.
Ultimately, given the increase in inventories, declining profitability of mills, and the overall demand situation, the iron ore market is expected to face more challenges in the near future. These factors will not only affect prices but could also lead to further developments in the steel industry.
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