According to Sina Finance, from a macro perspective, while favorable policy tailwinds may provide some support for downstream iron ore demand—and expectations among steel mills could be boosted by a major upcoming meeting at month's end alongside a warming G2 macroeconomic climate—steel mill capacity utilization and output likely remain resilient. However, the  Work Plan for Stable Growth in the Iron and Steel Industry (2025–2026) explicitly calls for precise control over capacity and output, a strict ban on new capacity, and support for regions to phase out the traditional blast furnace-converter (BF-BOF) route in favor of the electric arc furnace (EAF) route. It also emphasizes securing supplies and stabilizing prices for raw materials like iron ore and coking coal. Coupled with the Ministry of Industry and Information Technology’s (MIIT) revised *Measures for Capacity Replacement in the Iron and Steel Industry*—which raises replacement ratios and gradually eliminates inter-enterprise capacity swaps—actual demand for iron ore may still face downward pressure. Additionally, while geopolitical tensions in the Middle East have fluctuated, the overall trend toward easing has alleviated cost-side disruptions, though short-term macroeconomic uncertainty persists.

On the supply side, iron ore shipments from Australia and Brazil (tracked across 19 ports) rose by 580,000 tonnes last week, while arrivals at 45 Chinese ports dropped sharply by 2.25 million tonnes; iron ore supply is tightening at the margin following the end of the fiscal-year shipment push by major Australian miners. However, the Simandou project in Guinea is set to ramp up capacity starting in 2026, with an expected incremental volume of around 20 million tons, eventually reaching full capacity of 120 million tons by 2030. As the "Big Four" overseas miners remain in a period of intensive project commissioning, their overall iron ore supply is likely to continue increasing. This year, Rio Tinto’s Simandou and Western Range projects represent the most certain supply additions among the Big Four; new projects from BHP and Fortescue (FMG) are largely replacement-oriented, limiting the overall net increase. Meanwhile, Vale’s planned restart of the Capanema mine project could contribute to shipment growth in 2026. Considering the impact of price fluctuations on non-mainstream mines, the actual increase in iron ore supply for the year is projected to range between 35 million and 65 million tons. Consequently, the overall iron ore supply is expected to be relatively ample, driven by the easing of geopolitical tensions in the Middle East and increased shipments from the Simandou project and Brazil.

On the demand side, my country's official manufacturing PMI for June rose by 0.3 percentage points month-on-month to 50.3%, returning to the expansion zone, while the shipbuilding industry continued to lead globally across three key indicators in the first half of the year. Furthermore, expectations remain high due to policy boosts—such as urban renewal initiatives and the official commencement of the new Three Gorges waterway channel—and last week’s hot metal production continued to rise, remaining at a yearly high; this suggests that end-user demand for iron ore retains some resilience. However, the "Work Plan for Stable Growth in the Iron and Steel Industry (2025–2026)" explicitly calls for precise control over production capacity and output, a ban on new capacity additions, and other measures. Coupled with the Ministry of Industry and Information Technology’s revised "Implementation Measures for Capacity Replacement in the Iron and Steel Industry"—which raises replacement ratios and phases out capacity swaps between different enterprises—these policies may exert downward pressure on iron ore demand in the medium to long term. Additionally, year-on-year growth rates for real estate, narrow-scope infrastructure, and manufacturing investment in May showed a significant decline; combined with potential pressure on end-user demand during the off-season, there remains a risk of a negative feedback loop developing.

Regarding inventories, steel mills continued to increase their iron ore stockpiles last week amidst rising hot metal production, while port inventories saw some drawdown following a period of significant accumulation; nevertheless, the pressure for port inventory buildup persists as steel mills maintain low-inventory strategies.

In summary, while favorable policy signals may provide some support for end-user demand—and expectations among steel mills could be bolstered by a major meeting scheduled for month-end alongside a warming macroeconomic climate between China and the US—steel mill capacity utilization and steel output may remain resilient. However, my country's crude steel output has continued to decline year-on-year; under policy constraints—including stricter replacement ratios and the phasing out of inter-enterprise capacity swaps—overall crude steel supply faces downward pressure, which in turn weighs on the demand for iron ore. On the other hand, the off-season effect typical of the "late July to early August" period is likely to intensify; in particular, with the influence of El Niño potentially triggering frequent heavy rains, high temperatures, and extreme weather, actual downstream demand for iron ore is unlikely to see a significant recovery. Compounded by potentially tight carbon-related supplies, steel mill profit margins may face further contraction, leading to a possible decline in hot metal output and putting pressure on iron ore demand. Consequently, iron ore port inventories may continue to face accumulation pressure, limiting the scope for a price rebound.

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