Recently, driven by short-term factors such as the outbreak of geopolitical conflicts in the Middle East and the resumption of work following domestic holidays, iron ore prices have rebounded rapidly, drawing widespread market attention. However, a thorough analysis of the current fundamentals of iron ore supply and demand reveals that this price rebound lacks substantive support and does not have a foundation for sustained price increases. Market participants should maintain a rational perspective and remain vigilant against the real risks lurking behind overheated expectations.

I. Supply Side: Ample Supply with Clear Future Growth

Currently, global iron ore supply remains ample overall, and future supply growth is expected, further undermining the prospects for price increases. Since the beginning of this year, global iron ore supply has remained robust. Shipments in the first two months increased by 15.1% year-on-year, with February shipments alone rising by 17.4% year-on-year. In the Chinese market, cumulative iron ore imports reached 210 million tons in the first two months of this year, up 10.0% year-on-year, indicating that import supply remains ample.

Looking at near-term supply, due to geopolitical conflicts in the Middle East, several vessels carrying high-grade Brazilian iron ore concentrate have rerouted their voyages, diverting from their original Middle Eastern destinations to China. Until shipping operations in the Strait of Hormuz return to normal, this diversion strategy is likely to continue, which will further increase supply in China’s iron ore market and alleviate expectations of short-term supply tightness.

Looking at long-term supply, production from several major global iron ore projects will continue to ramp up this year. The release of capacity from projects such as Simandou, Xipo, Capaneema, Tieqiao, and Onslow will bring significant increases to global iron ore supply, further expanding the supply surplus and exerting downward pressure on iron ore prices in the long term.

II. Demand Side: Dual Contraction at Home and Abroad, Insufficient Support

In contrast to the ample supply, the iron ore demand side is experiencing a dual contraction both domestically and internationally, making it difficult to provide effective support for prices. Globally, global pig iron production in January decreased by 6.0% year-on-year, with China’s pig iron production falling by 10.9% year-on-year; this contraction in pig iron production has directly led to reduced demand for iron ore.

Since the beginning of 2024, steel exports have been a key channel for absorbing China’s crude steel production capacity. However, due to multiple factors such as escalating trade frictions and adjustments to export management policies, China’s steel exports in the first two months of this year fell sharply by 8.1% year-on-year. These export constraints have further trickled up the supply chain, suppressing demand for iron ore.

Currently, the pace of recovery in downstream end-user demand has become the focus of market attention. However, according to high-frequency market survey data, nationwide cement shipments have declined by 4.8% year-on-year (based on the lunar calendar), while the rates of project commencement and resumption for non-real estate projects, as well as the rate of capital disbursement, have also fallen year-on-year (based on the lunar calendar). These figures indicate that the recovery in end-user demand during the current peak season remains relatively modest, making it difficult to drive a significant increase in iron ore demand. Furthermore, since August of last year, steel mill profitability has continued to contract, with the profit margin of 247 steel mills remaining at a low level of around 30%. Under pressure on profitability, steel mills lack the incentive to expand production, further limiting the growth in iron ore demand.

III. Inventory: High Total Levels and Pronounced Structural Pressures

Both the total volume and structural pressures of iron ore inventories are significant, further exacerbating resistance to price increases. Currently, total port inventories of iron ore remain at a historical high of nearly 180 million tons, an increase of more than 20 million tons compared to the same period last year, indicating a clear accumulation of inventory.

Looking at specific grades, mainstream iron ore grades have continued to accumulate since the start of the year. Among them, the inventory of McFeely fines has surged by as much as 82.1% since the beginning of the year, while the inventory of PB fines and Newman fines has also increased by more than 20%. The continued accumulation of inventory not only occupies a large amount of storage resources but also reflects the current imbalance between supply and demand, directly suppressing iron ore prices.

IV. Conclusion: View Short-Term Fluctuations Rationally and Recognize the Fundamental Supply-Demand Dynamics

Overall, the rebound in iron ore prices since late February has been driven more by short-term market sentiment and technical corrections than by substantive improvements in supply-demand fundamentals. Therefore, it lacks the foundation to sustain a sustained price increase. Under the combined pressure of persistent global iron ore oversupply, contracting domestic and international demand, and high inventory levels, the upside potential for iron ore prices has been firmly capped.

Against this backdrop, all market participants should look beyond short-term price fluctuations, recognize the fundamental imbalance in iron ore supply and demand, maintain rational expectations, avoid blindly following speculative trends, and work together to ensure the stable operation of the iron ore market.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.