Prices for iron ore cargoes were at CNY 820 per tonne, pulling back from the seven-month high of CNY 840 per tonne reached on February 20th amid growing protectionist trade policies on Chinese metal sales.
Iron ore retreats from seven-month high
The retreat in prices came as concerns about rising trade barriers intensified. Vietnam recently announced it will impose anti-dumping measures on Chinese hot-rolled steel coils, following similar actions by South Korea and Brazil, both of which also pledged to impose tariffs on Chinese imports in the near future. These moves are part of a broader trend in which countries are increasingly focused on protecting their domestic steel industries, potentially limiting the market for Chinese exports.
Protectionist measures risk lowering iron ore demand
The protectionist measures risk lowering iron ore demand from major Chinese mills, which are already facing challenges due to the ongoing housing crisis and slowing manufacturing activity. These economic pressures have led to a shift in China’s focus toward exports, with December sales of steel reaching a record-high 9.7 million tons, a 26% increase compared to the previous year. This surge in exports underscores China's attempt to balance domestic slowdown with external demand, but it also signals growing vulnerability to international trade barriers, as the global steel market becomes more fragmented.
Pressure on iron ore prices came from shipping data
Further pressure on iron ore prices came from shipping data, which indicated higher iron ore exports from Brazil and Australia at the end of February. Both of these key producers have ramped up shipments, intensifying competition in the global iron ore market and contributing to a downward pressure on prices. Despite these challenges, China has indicated its intention to support economic growth. In January, the Chinese government issued CNY 693 billion of new bonds, more than double the amount issued in the previous year, signaling a commitment to fiscal stimulus aimed at revitalizing the country's slowing economy. While this move provides some hope for a recovery in domestic demand for steel and iron ore, the overall outlook for iron ore remains clouded by the combination of rising trade restrictions and global market dynamics. As such, the iron ore market is likely to remain volatile in the near term, with supply-demand imbalances and geopolitical tensions continuing to play a significant role in price fluctuations.
