Iron ore futures fell to CNY 800 per tonne, retreating from the seven-month high of CNY 840 touched on February 20th, as protectionist trade policies and risks of capacity restraints for steel producers limited the rebound in ore demand. The decline reflects broader concerns over the global steel market, as governments move to shield their domestic industries from excess Chinese exports.
Iron ore pulls back for fifth session
Vietnam recently announced it will impose anti-dumping measures on Chinese hot-rolled steel coils, following similar actions from South Korea and Brazil. These trade barriers threaten to curb steel exports from China, potentially weakening demand for iron ore from the country’s major producers. The pressure comes at a time when China’s property sector remains in crisis, forcing domestic steelmakers to rely more heavily on foreign markets. In December, Chinese steel exports surged by 26% year-over-year to a record 9.7 million tons, underscoring the importance of external demand.
Steel production must decrease in China
Meanwhile, Chinese authorities have reiterated that steel production must decrease to align with climate targets, further dampening the outlook for iron ore consumption. Restrictions on blast furnace operations, particularly in industrial hubs like Hebei and Jiangsu, signal an ongoing shift towards greener production methods, including electric arc furnaces that require less iron ore.
China government is ramping up efforts to support economic growth
Still, there are signs that China’s government is ramping up efforts to support economic growth. In January, officials issued CNY 693 billion in new government bonds—more than double the amount from the previous year—suggesting that authorities are beginning to implement previously announced stimulus measures. Market participants are closely watching for additional policy support, particularly in infrastructure and manufacturing, which could provide a floor for iron ore demand in the coming months. However, lingering concerns over weak domestic consumption and uncertain global trade conditions continue to weigh on market sentiment.
