Price trend

According to the commodity market analysis system of SunSirs, the iron ore market exhibited a volatile downward trend last week (May 16–23; hereinafter the same). The entire "ferrous complex" sector weakened in unison, the price center of gravity for iron ore shifted notably lower, and the previous pattern of high-level price contention was disrupted. As of the 23rd, the SunSirs Iron Ore Price Index stood at 780.78, marking a month-on-month decline of 2.12%, as illustrated in the chart above. The decline in iron ore prices last week was characterized by a dual-driver dynamic: "loosening cost expectations compounded by weakening demand." Finished steel prices were the first to undergo a correction, thereby marginally eroding the logic of cost-based support; consequently, market sentiment shifted from its previous bullish and optimistic stance toward a more cautious and bearish outlook. Throughout the week, the ferrous complex experienced a synchronized decline; specifically within the raw materials segment, iron ore recorded a relatively pronounced drop, signaling that the bullish premium accumulated during the preceding period is now being gradually squeezed out of the market.

Regarding inventory, as of May 22, the stock of imported iron ore across 45 major ports nationwide stood at 164.0078 million tons, a month-on-month decrease of 1.0115 million tons. The daily average port throughput was 3.2466 million tons, a week-on-week increase of 18,000 tons; meanwhile, the number of vessels currently at port totaled 119, an increase of 10 from the previous week. Last week, the aggregate inventory of imported iron ore held by steel mills nationwide reached 88.2743 million tons, a week-on-week increase of 505,900 tons. On the inventory front, the destocking trend continued this week, though its momentum showed a marked weakening. As of May 15, inventory across the 45 ports stood at 165.0193 million tons—a month-on-month decrease of 247,800 tons—marking the fourth consecutive week of destocking, albeit with a continuously narrowing rate of decline. The daily average port throughput was 3.2286 million tons, a week-on-week increase of 129,200 tons. It is projected that in May, port inventories will revert to an accumulation phase, rebounding to approximately 176 million tons. The absolute level of port inventory—currently at 165 million tons—remains at a historically high level for this time of year; consequently, the downward pressure this exerts on iron ore prices is far from being alleviated.

On the supply side, as of May 18, the total volume of global iron ore shipments last week amounted to 28.594 million tons—a week-on-week decrease of 4.893 million tons. Total shipments from Australia and Brazil reached 22.919 million tons, down 4.6 million tons from the previous week. Australian shipments totaled 18.233 million tons (a week-on-week decrease of 426,000 tons), of which 15.687 million tons were destined for China (down 1.019 million tons week-on-week). Brazilian shipments stood at 4.687 million tons, marking a substantial week-on-week decline of 4.173 million tons. Last week, shipments from both Australia and Brazil contracted significantly. This contraction in supply was primarily driven by the sharp drop in Brazilian shipments (down 4.173 million tons week-on-week) and appears to represent a short-term disruption rather than a trend reversal. Looking ahead, with the conclusion of seasonal disruptions—such as Australia's cyclone season—the period from late May through June is expected to usher in the traditional peak season for overseas mine shipments. Against the backdrop of the rainy seasons in Australia and Brazil largely drawing to a close, mines ramping up shipments to meet fiscal year-end targets, and non-mainstream mines continuing to boost output, iron ore supply in May is projected to increase by over 10 million tons month-on-month. This would set a new year-on-year record, with average port arrivals expected to range between 25.5 million and 26.5 million tons. May marks the beginning of the peak supply season for iron ore, with supply expansion driven by factors such as BHP ramping up volumes, accelerated progress on the Simandou project, and Venezuelan production growth exceeding expectations. The medium-term landscape of ample global supply remains unchanged.

Regarding demand, as of May 22, the operating rate of steel mills' blast furnaces stood at 84.14%, a week-on-week increase of 0.62%; the capacity utilization rate for blast furnace ironmaking reached 90.28%, up 0.56% from the previous week; the profitability rate among steel mills was 63.2%, a month-on-month decline of 0.87%; and the average daily output of molten iron was 2.4081 million tons, an increase of 14,800 tons from the previous period. The average daily consumption of imported iron ore among sampled steel mills currently stands at 2.9624 million tons, up 17,400 tons from the previous period. Driven by a recovery in profit margins, steel mills remain reasonably active in production, thereby providing rigid demand support for iron ore. However, several indicators suggest that molten iron output is nearing a peak: First, the week-on-week growth in molten iron output has essentially stalled after several consecutive weeks of expansion, while maintenance data indicates that the production volume affected by upcoming maintenance work is set to increase slightly. Second, a divergence in profit margins between electric arc furnaces (EAFs) and blast furnaces has emerged, accompanied by rising expectations of a seasonal weakening in demand for finished steel products. Third, domestic investment in infrastructure and manufacturing sectors saw a significant month-on-month decline in April; this trend of weakening end-user steel consumption persisted into May, making it difficult to foresee any near-term improvement in demand from downstream sectors. Furthermore, in early May, the steel inventory held by key steel enterprises reached 16.88 million tons—a 9.4% increase compared to the previous ten-day period—indicating that accumulating inventory pressure is likely to dampen steel mills' willingness to maintain high production levels.

Regarding scrap steel, the market has exhibited a pattern of "initial gains followed by a decline," characterized by overall weakness and a downward trend. After a slight uptick at the beginning of the week, prices came under pressure and retreated, resulting in a marginal shift downward in the overall price center. Over the past week, the scrap steel market pivoted from the early-week tentative rise toward a weak downward trajectory; the supply-demand landscape is currently shifting from a state of "tight balance"—seen previously—to one of "strong supply and weak demand." The broad-based weakening of the ferrous metals complex has created a negative feedback loop; the relative cost-effectiveness of scrap steel has once again diminished, and electric arc furnace (EAF) operating rates continue to decline—multiple factors are collectively exerting downward pressure on scrap steel prices. In the short term, the scrap steel market is expected to maintain a volatile yet generally weak trend, though its downside potential appears relatively limited. In the medium term, key factors to monitor include trends in finished steel products, changes in tax invoice policies, and improvements in the profitability of electric arc furnaces.

Market Outlook: 

In summary, analysts at SunSirs believe that the iron ore market is currently situated within a critical transition window—shifting from the supply-demand equilibrium characteristic of the peak season to a looser market environment typical of the off-season. In the short term, persistently high levels of hot metal production continue to provide underlying support; however, upward momentum has clearly begun to wane. In the medium term, a confluence of three pressures—explicit increases in supply, demand that has peaked and is now trending downward, and inventories shifting from depletion to accumulation—is expected to gradually materialize. Consequently, iron ore prices are projected to continue exhibiting weak, volatile fluctuations in the short term, while the risk of downward pressure and decline is expected to intensify over the medium term.

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