Iron ore firms up on steel production cuts

Iron ore futures hovered around CNY 800 per tonne on Wednesday, holding near two-week highs as traders weighed the prospect of further steel production curbs in China.

Reports indicated that mills in northern provinces have been instructed to scale back output in the run-up to the September 3 military parade, part of efforts to ensure clearer skies during the event. Such temporary restrictions are expected to help reduce excess steel supply, improve mill profit margins, and indirectly support demand for higher-grade iron ore in the short term.

Market sentiment also drew support from broader macro developments, particularly the 90-day extension of the U.S.–China trade truce. The pause in tariff escalation gives negotiators additional time to work toward a longer-term agreement, easing immediate concerns over trade flows between the world’s two largest economies and providing some relief to the industrial metals complex.

However, underlying seasonal demand for steel — and by extension iron ore — remains subdued. Extreme heat waves across parts of China, combined with heavy rainfall in others, have continued to disrupt downstream construction activity, slowing consumption of steel products.

This has led to a build-up in steel inventories, tempering the bullish impact of recent price gains in iron ore and raising questions about the sustainability of the rally if end-user demand fails to recover.

Looking ahead, traders are closely monitoring the duration and extent of the northern mill restrictions, as well as weather patterns and construction activity in the early autumn months. Any signs of sustained infrastructure momentum or additional production discipline could help offset the seasonal weakness, while a rapid rebound in steel output after the parade could put renewed downward pressure on prices.