Iron ore prices are expected to fall hard
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July 28 07:05:55, 2025
Iron ore prices are expected to face significant downward pressure, according to recent reports. Although the inventory of iron ore at ports has seen a slight increase recently, it remains at historically low levels, having stayed below 70 million tons for over two and a half months. This trend highlights the ongoing challenges in the steel industry, where both supply and demand dynamics continue to shift rapidly.
On the other hand, steel stock levels have shown high volatility. According to data from MySteelNet, as of April 5, 2013, the total social inventory of five major steel products in key cities across the country stood at 21.6259 million tons, marking a 1.42% decline from the previous week and the third consecutive weekly drop. This continued reduction suggests a cautious approach by market players amid uncertain conditions.
Meanwhile, the China Iron and Steel Association reported that in mid-March, the inventory of 80 key steel companies reached 14.51 million tons, rising to 12.85 million tons by the end of March—a 12.99% increase. This record-high inventory level indicates a growing surplus in the sector, which could further pressure prices in the short term.
As of April 7, the total inventory of imported iron ore at 30 major ports nationwide was 67.96 million tons, an increase of 40,000 tons compared to the previous week. Despite this small rise, the overall level remains well below historical averages, signaling tight supply conditions.
Wang Xi, a researcher at MySteelNet, noted that the iron ore port inventory has remained below 70 million tons for more than two and a half months, with only a modest recovery in recent weeks. “Although there has been some improvement, the level is still very low,†she said. This low inventory is attributed to the current strategy of maintaining minimal stock levels, which reflects the financial strain on steel mills.
For instance, Xinyu Steel used to maintain a three-month inventory, but now it’s down to about one month. Similarly, Anshan Iron and Steel previously kept a two-month stock, but now it’s reduced to just one month. This shift shows that many steel plants are struggling with liquidity and are trying to minimize costs.
Market participants are also waiting for iron ore prices to fall further before making purchases. However, this low inventory poses risks. If the market rebounds, demand could surge, potentially pushing prices higher. Additionally, the limited availability of spot resources and shrinking supply have made traders reluctant to lower prices, suggesting that iron ore prices may remain stable in the near term.
Analysts expect a narrow price range around $135 per ton, with little likelihood of sharp fluctuations. Meanwhile, steel mills are cutting back on production due to weak demand and rising costs. Reports indicate that among 29 steel companies in Shanghai and Shenzhen, 11 reported losses, including Anshan Iron and Steel, which lost up to 4.157 billion yuan.
Despite these challenges, some industry sources believe the situation may not be as dire as the stock market suggests. They point out that many steel mills have recently expanded their capacity, with several large blast furnaces coming online. This indicates that demand for iron ore is likely to remain strong, even if prices don’t drop significantly.
Gao Bo, a senior analyst at Iron Ore Research, believes that while the market hopes for lower iron ore prices, the current low inventory levels make a sharp decline unlikely. He notes that traders understand the risks involved, but they are still confident in the long-term support from steel demand.
He also points out that terminal demand has not improved substantially, and without a rebound in steel prices, iron ore prices will struggle to rise. As a result, market players are hesitant to build up inventory, leading to a potential oversupply and further price pressures.
In conclusion, while the iron ore market faces uncertainty, the combination of low inventory, limited supply, and strong demand from steel mills suggests that prices are unlikely to fall sharply in the near future. The market remains in a delicate balance, with both buyers and sellers closely watching for signs of change.