Iron ore futures fell toward CNY 700 per tonne, retreating from the six-week high of CNY 740 reached on May 14th, as sentiment soured amid a deteriorating outlook for ferrous metal demand in top consumer China.
Iron ore extends decline
The pullback reflects growing concerns that structural headwinds in China’s property market—historically the largest driver of steel consumption—are intensifying. Beijing recently signaled that it may prohibit property developers from selling homes before their completion, a dramatic policy shift aimed at protecting buyers but one that would simultaneously strip developers of a critical source of upfront financing.
Such a move would exacerbate liquidity strains across the already debt-laden real estate sector, potentially accelerating defaults and triggering large-scale liquidations. This scenario would not only destabilize domestic construction activity but also remove a key pillar of demand for global steel markets, placing further downward pressure on raw materials like iron ore.
Expectations of reduced steel production quotas
Adding to the bearish tone, the looming changes coincide with expectations of reduced steel production quotas for 2025, which would compound the demand hit from the property crackdown. Speculation about tighter capacity controls was reinforced by comments from Baosteel, one of China’s largest steelmakers, which projected that mainland output could drop by as much as 50 million tons this year. Such a reduction would represent a significant cutback, signaling Beijing’s broader intent to align heavy industry with environmental and economic rebalancing goals.
The price decline persisted despite recent efforts by Chinese authorities to revive economic activity. The People’s Bank of China (PBoC) has rolled out a series of rate cuts and liquidity injections, while policymakers have hinted at increased government bond issuance to support infrastructure investment. However, these measures have so far failed to offset the dampening effect of a structurally weakening property sector and tepid investor confidence, leaving the iron ore market vulnerable to further downside pressure.
