Iron ore futures inched higher to CNY 710 per tonne, rebounding modestly after testing eight-month lows at CNY 698 on May 27th, as sentiment improved slightly following signs of tariff relief from the United States.
Iron ore inches higher on tariff relief
A U.S. federal court ruled against the imposition of broad reciprocal tariffs introduced during the Trump administration, citing an unsubstantiated declaration of economic emergency. The decision was seen as a positive step toward reducing trade friction, particularly for global manufacturing hubs that rely heavily on uninterrupted raw material flows, thereby offering some support to industrial commodities like iron ore.
However, gains remained limited, with futures still down approximately 10% year-to-date, weighed by persistently weak ferrous metal demand in China—the world’s largest consumer of steel. Market participants remain deeply concerned about the outlook for China’s beleaguered property sector, which accounts for roughly one-third of domestic steel demand. Authorities have signaled that they may prohibit real estate developers from selling homes before project completion, effectively cutting off a key funding channel for the sector. Such a move, if implemented, would further strain the cash flows of already debt-laden developers, increasing the risk of large-scale defaults and potentially triggering a new wave of liquidations. The resulting contraction in housing starts would remove a major source of demand from the global steel market, exacerbating the current demand imbalance.
Mixed outlook
At the same time, expectations of looming production curbs in China added to the mixed outlook. Speculation over government-imposed capacity limits was bolstered by comments from Baosteel, one of China’s largest steel producers, which indicated that total steel output on the mainland could drop by as much as 50 million tonnes this year. While such a reduction could help stabilize supply-demand dynamics in the longer term, the near-term uncertainty has continued to weigh on pricing.
The decline in iron ore prices has persisted despite a slew of stimulus measures aimed at reigniting demand, including multiple interest rate cuts by the People’s Bank of China (PBoC), increased bond issuance to fund infrastructure projects, and relaxed rules for local government borrowing. So far, these efforts have yet to produce a significant turnaround in construction activity or broader industrial output. As a result, iron ore markets remain under pressure, with investors closely watching for any additional policy signals or macroeconomic data that might hint at a more sustained recovery.
