Iron ore falls on weak fundamentals

Iron ore futures fell below CNY 770 per tonne on Friday, extending losses for a second straight session as demand concerns coincided with ample supply.

Disruptions to steel production tied to China’s upcoming military parade turned out less severe than expected, easing near-term concerns about tighter availability but leaving the market focused on broader consumption risks. Longer-term demand from the world’s top buyer remains clouded by persistent weakness in the property sector, sluggish infrastructure activity, and uneven momentum in manufacturing.

Despite targeted government support, credit growth has faltered and July’s new yuan loans contracted for the first time in two decades, underscoring the reluctance of households and firms to commit to fresh spending.

Industry data showed portside inventories in China climbed 0.2% from the prior week to 138.5 million tons as of August 21, extending an upward trend that has raised oversupply worries. Steel prices have also remained under pressure, with construction activity slowed by extreme summer weather, contributing to inventory accumulation and dampening mill restocking needs.

On the supply side, global shipments remain strong. Exports from Brazil are projected to rise 4% year-on-year in 2025, supported by improved mining efficiency and infrastructure upgrades, particularly at major ports. These higher volumes are expected to partly displace shipments from Australia, Peru, and India in China’s import mix. Australian exports have remained steady but face potential disruptions later in the year from seasonal cyclones and other weather-related risks. Meanwhile, Indian exports have stayed constrained by robust domestic demand as the government pushes infrastructure investment programs.

Broader trade dynamics are also weighing on sentiment. With global steel demand cooling and protectionist measures expanding, including the recent extension of US tariffs on steel-related goods, iron ore remains vulnerable to shifts in both policy and demand. Against this backdrop, prices could remain volatile as markets balance resilient seaborne supply with uncertain Chinese consumption, leaving sentiment cautious heading into the final quarter of the year.