IRON ORE ENDS THE WEEK SLIGHTLY LOWER IN CHINA AS STOCKPILES RISE AND DEMAND COOLS

IRON ORE PRICES IN CHINA FINISHED THE WEEK WITH A MODEST DECLINE, AS RISING PORT STOCKPILES AND SOFTER DEMAND OFFSET A LATE-WEEK BOUNCE IN FUTURES PRICES. THE MOVE HIGHLIGHTS THE ONGOING STRUGGLE IN THE MARKET TO FIND A STRONG BULLISH CATALYST AMID STRUCTURAL WEAKNESS IN STEEL CONSUMPTION.

ACCORDING TO DATA FROM STEELHOME, TOTAL IRON ORE INVENTORIES AT CHINESE PORTS ROSE 2.26% FROM THE PREVIOUS WEEK TO AROUND 148.8 MILLION METRIC TONS AS OF DECEMBER 26. THE BUILDUP IN STOCKS CONTINUES TO WEIGH ON PRICES, SIGNALING THAT SUPPLY REMAINS AHEAD OF CURRENT DEMAND.

ON THE DALIAN COMMODITY EXCHANGE, THE MOST-ACTIVE MAY IRON ORE CONTRACT CLOSED FRIDAY UP 0.71% AT 783 YUAN PER METRIC TON, OR ABOUT $111.74. DESPITE THE DAILY GAIN, THE CONTRACT STILL ENDED THE WEEK DOWN 0.06%, UNDERSCORING A MARKET THAT REMAINS LARGELY RANGE-BOUND.

PRICES WERE ALSO INFLUENCED BY POLICY SIGNALS FROM BEIJING. CHINA ANNOUNCED IT WILL CONTINUE TO REGULATE CRUDE STEEL OUTPUT AND MAINTAIN A BAN ON ADDING ILLEGAL NEW CAPACITY FROM 2026 THROUGH 2030. THE MOVE IS PART OF A BROADER EFFORT TO CURB OVERPRODUCTION AND BRING GREATER STABILITY TO BOTH DOMESTIC AND GLOBAL STEEL MARKETS.

THE ANNOUNCEMENT FOLLOWED COMMENTS FROM TADASHI IMAI, PRESIDENT OF THE JAPAN IRON AND STEEL FEDERATION, WHO SAID THE LICENSING SYSTEM WOULD NOT BE A VERY EFFECTIVE TOOL TO ADDRESS THE INDUSTRY’S IMBALANCES. JAPAN, THE WORLD’S SECOND-LARGEST STEEL EXPORTER, HAS ACCUSED CHINESE STEELMAKERS OF BENEFITING FROM GOVERNMENT SUBSIDIES THAT ENCOURAGE OVERPRODUCTION AND LOW-PRICED EXPORTS, FURTHER PRESSURING GLOBAL MARKETS.

ON THE DEMAND SIDE, CHINA’S PROPERTY SECTOR REMAINS A KEY DRAG. ONCE THE LARGEST CONSUMER OF STEEL IN THE COUNTRY, REAL ESTATE HAS BEEN IN A PROLONGED DOWNTURN SINCE MID-2021, MARKED BY FALLING HOME PRICES AND WEAK SALES. THIS CONTINUES TO LIMIT STEEL OUTPUT GROWTH AND, BY EXTENSION, DEMAND FOR IRON ORE.

CHINA ANNOUNCED A STEEL EXPORT LICENSING SYSTEM ON DECEMBER 12, AIMING TO BETTER CONTROL EXPORT FLOWS AND HELP STABILIZE PRICES. HOWEVER, WITH INVENTORIES ELEVATED AND END-USE DEMAND STILL SOFT, THE IRON ORE MARKET LACKS A CLEAR NEAR-TERM DRIVER FOR A SUSTAINED RALLY.