Considering that steel demand is expected to decline in the 9-12 period, combined with the gradual advancement of domestic "anti-internal competition" policies, it is highly likely that steel mills will reduce production in the second half of the year.

China's steel production capacity and output both account for more than half of the global total, and it needs to import more than 110 million tons of iron ore every year, accounting for more than 70 percent of the global iron ore imports, making it the world's largest importer of iron ore. In the first half of the year, global iron ore production increased by 30.39 million tons, which led to a general loose supply of iron ore. However, due to the slowdown in global economic growth, the global粗 steel production has shown a downward trend. In the second half of the year, it is expected that global iron ore production will increase by 62.37 million tons compared to the first half of the year. With the increase in supply, iron ore prices are facing downward pressure from September to December.

China accounts for more than half of the global steelmaking capacity and output, and it needs to import more than 110 million tons of iron ore every year, accounting for more than 70 percent of the global iron ore imports, making it the world's largest importer of iron ore.

80% of the iron ore imported by our country comes from Australia and Brazil, among which more than 60% is imported from Australia. The high-quality resources of global iron ore are monopolized by the four major mines, Rio Tinto, Vale, BHP, and FMG. 80% of the iron ore imported by China comes from these four major mines. The four major mines have a dominant position in the global iron ore pricing, holding the power to set the price. The shares of the four major mines are mostly held by syndicates or investment funds from Europe, the United States, Japan and other countries, which puts our country in a relatively passive situation when importing iron ore, and more than 90% of the profits of China's steel industry chain are captured by the four major mine enterprises.

The cost of iron ore from the four major mines (CFR northern China ports) does not exceed $40/ton. From 2022 to 2023, the average import price of iron ore in China (62% Fe: CFR northern China ports) ranges from $117 to $120/ton, and in 2024, it is about $109/ton. From January 1, 2025, to August 26, the average import price of iron ore in China is $98.7/ton, and on August 27, the import price of iron ore is $101.95/ton.

From the supply side perspective, data shows that in 2025, global iron ore production is expected to increase by 303.9 million tons year-on-year, among which, the production in the second half of the year will increase by 62.37 million tons compared to the first half, an increase of 28.31 million tons year-on-year. The production growth mainly comes from the gradual release of capacity from projects such as the Iron Bridge project, the Onslow project, and the Amilab Libya project. In addition, the Simandou project in Guinea, Africa, jointly invested and developed by companies such as China Baowu and Australia's Rio Tinto, is planned to be put into production at the end of 2025, with a designed annual capacity of 100 million tons. The West Slope project in Australia, jointly invested and operated by Rio Tinto Group and China Baowu, has been put into production in the first half of this year, with a full capacity of 25 million tons/year.

As of August 22, the total shipment volume of Australian Iron Ore to China via the Port of Tianjin has reached 847.4 million tons, an increase of 4.17 million tons, or 0.5%, compared to the same period last year.

From January to July, China imported 697 million tons of iron ore, a decrease of 17.27 million tons, or 2.4 percent, compared to the same period last year. The reduction in imports has affected the total supply of domestic iron ore, given that the country's dependence on foreign iron ore is about 80 percent.

From January to July, China’s output of iron ore concentrate reached 596 million tons, the same as the corresponding period last year. If calculated by iron content, domestic iron ore contributed about 20% to the total supply. From January to June, although domestic ore production was reduced, the impact on the total iron ore supply was basically balanced. However, due to the reduction in iron ore imports, the total iron ore supply in China decreased by about 1.9% year-on-year from January to July.

Looking at the demand side, from January to July, the global output of crude steel was 108.6 million tons, a decrease of 18.16 million tons compared to the same period last year, a decrease of 1.6%. In the first half of the year, the global iron ore output increased by 3.039 million tons, which made the overall supply of iron ore show a loose trend. However, due to the slowdown in global economic growth, it is expected that the global output of crude steel will show negative growth in 2025.

From the domestic market perspective, the data show that as of August 22, the average daily iron water production of the 247 blast furnaces in the country was 237.75 million tons, an increase of 7.3% compared to the 224.46 million tons in the same period last year. From January to July, the daily iron water production of the 247 blast furnaces in the country was 236 million tons, an increase of 3.6% year-on-year. The current daily iron water production is 240.75 million tons, an increase of 4.8% compared to the average value of 2024, 229.7 million tons, which shows that the current demand for iron ore from steel mills is strong.

However, considering the expected decline in steel demand from September to December and the gradual advancement of domestic policies against " internal competition", it is highly likely that steel mills will reduce production in the second half of the year.

Data show that from January to July, China's iron production accumulated 505.8 million tons, a decrease of 1.3% compared to the same period last year; the total supply of iron ore decreased by 1.9% year-on-year. Overall, the total demand for iron ore exceeds supply, leading to a decline in iron ore stocks. As of August 22, China's 45 ports iron ore stock was 138.45 million tons, a decrease of 10.317 million tons from the beginning of the year; the import ore stock of 247 steel mills counted by Shanghai Steel Network was 90.655 million tons, a decrease of 7.935 million tons from the beginning of the year.

From the perspective of ore cost, according to the cash cost of the mainstream mines in the world, the production cost of the four major mines is between 20 and 40 US dollars per ton, while the production cost of domestic mines is between 80 and 90 US dollars per ton.

On August 26th, the PB powder price at the Cao Feng Dian Port in our country was 782 RMB /ton, an increase of 4.2% compared to the same period last year, which was 733 RMB /ton. Currently, the ratio of the spot price of rebar to iron ore is at a low level, and compared to the price of rebar, the price of iron ore is overvalued. Currently, the profits of domestic steel mills are thin, and some steel mills are even on the edge of profitability, however, the profit margin of the four major overseas mines exceeds 200%. In the domestic steel industry chain, more than 90% of the profits are captured by overseas mines.

Entering the second half of the year, with the advancement of the "anti-internal competition" measures in China's steel industry and the transformation of the supply and demand of iron ore to a loose situation, it is expected that the ratio of rebar price to iron ore price will rise, and investors can consider participating in the cross-commodity arbitrage operation of buying rebar, hot coil, and selling iron ore.

To sum up, on the supply side, in 2025, global iron ore production is expected to increase by 303.9 million tons year-on-year, among which, the production in the second half of the year is expected to increase by 62.37 million tons compared to the first half of the year. On the demand side, in 2025, the global coarse steel production is expected to show a downward trend year-on-year. From the domestic market perspective, due to the decline in steel demand and the advancement of the "anti-internal competition" policy, it is highly likely that steel mills will reduce production or limit production from September to December, and the demand for iron ore is highly likely to decrease. With the increase in supply, it is expected that the iron ore price from September to December will be under downward pressure.

As an integrated internet platform providing benchmark prices; On September 4th, the benchmark price of iron ore (Australia) by SunSirs was 789.67 RMB per ton, a decrease of 0.55% compared with the beginning of this month (794.00 RMB per ton).

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