Iron ore climbs as China targets overcapacity

Iron ore futures rose toward CNY 800 per tonne on Tuesday, snapping a four-day losing streak as Beijing ramped up efforts to combat deflationary pressures and tackle overcapacity in key sectors.

President Xi Jinping criticized local governments for concentrating investment in overlapping industries such as artificial intelligence, computing power, and new energy vehicles, highlighting inefficiencies that have weighed on economic performance and contributed to broader economic imbalances.

The comments underscored central authorities’ intention to shift focus toward more sustainable and productivity-enhancing investment.

Markets are also closely watching this week’s Politburo meeting for potential announcements on fresh stimulus measures aimed at stabilizing growth and supporting key sectors such as construction, infrastructure, and heavy industry. Analysts expect possible fiscal loosening, accelerated bond issuance, and targeted support for struggling property developers, all of which could boost demand for steel inputs like iron ore.

Elsewhere, investors awaited developments in the US-China trade talks underway in Stockholm. The two countries are working to extend their fragile trade truce by another 90 days ahead of the August 12 deadline, and any sign of progress could ease fears of renewed tariffs and disruptions to raw material flows.

Meanwhile, a newly reached US-EU trade agreement retained existing 50% tariffs on steel and aluminum, reinforcing concerns over global trade tensions and complicating export strategies for Chinese producers.

Adding to price support, recent supply-side constraints from Brazil and Australia—due to maintenance and weather-related disruptions—have added uncertainty to global seaborne iron ore supply. Market participants are also monitoring steel mill margins and daily blast furnace output, which remain sensitive to both government production controls and real estate market conditions.