Iron Ore Futures Drop Below $100 as China Demand Concerns Mount

Iron ore futures fell sharply on Friday morning, breaking below the critical $100 psychological barrier that traders had defended for weeks.

The SGX TSI Iron Ore CFR China futures dropped to $99.80 per metric ton by 06:32 UTC, marking a significant retreat from Thursday’s close of $101.61.

The decline represents a $1.81 drop overnight, erasing gains from the previous session when prices had climbed 1.56%. Trading data from the Singapore Exchange shows the benchmark now trades near its lowest levels since early May.

Technical indicators paint a bearish picture for the commodity. The daily chart reveals prices have broken below the 20-period moving average at $99.59, while the RSI sits at 56.73, suggesting momentum remains weak.

The MACD indicator shows a positive reading of 0.33, but recent price action suggests this momentum may be fading. Key Fibonacci retracement levels now come into focus.

The 78.6% level at $98.85 provides immediate support, while a break below could target the critical $95.40 level that analysts have identified as major support.

China’s Steel Output Resilient Amid Raw Material Constraints

Chinese steel production data continues to show resilience despite property sector weakness. Daily output reached 2.8 million tonnes in early May, up from 2.6 million tonnes in January.

However, steel inventories remain low at 11.6 million tonnes, the lowest seasonal level since 2016. Supply constraints from Australia persist as Rio Tinto faces quality issues with its Pilbara Blend fines.

The company downgraded iron content from 61.6% to 60.8% for July through September deliveries. Cyclone disruptions earlier this year reduced Australian shipments by approximately 15 million tonnes.

Chinese port inventories stand at 138 million metric tons, well above the 135 million ton threshold that typically triggers panic buying. Steel mills have adopted just-in-time purchasing strategies, reducing average inventory levels to 28 days from 35 days in March.

Physical market activity shows selective buying rather than aggressive restocking. Recent transactions include 90,000 tonnes of Newman Fines at $96.30 per ton and 170,000 tonnes of PB Fines at $98.05 per ton.

The broader metals complex shows mixed signals. Gold trades at elevated levels while copper maintains modest gains. Silver has outperformed significantly this year, rising 14.72% since January.

Open interest remains steady at 277,590 contracts, indicating cautious market participation. Money managers have switched from net short to net long positions over six weeks, but physical market participants maintain short positions.

Analysts expect iron ore to trade at $98.13 by quarter-end, with longer-term forecasts pointing to $92.50 within twelve months. The looming Simandou project in Guinea threatens to add significant supply pressure, with production expected to exceed 120 million tonnes annually by 2028.

Friday’s break below $100 signals potential further weakness ahead. Traders now watch the $95.40 support level closely, as a break could trigger accelerated selling toward $89.30.

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