Iron Ore Hovers Below $100 as China’s Mixed Signals Keep Market in Check

Iron ore futures traded at $99.95 per metric ton Thursday morning, down 0.20% from Wednesday’s close of $100.25.

The benchmark SGX TSI Iron Ore CFR China (62% Fe Fines) Index continues to struggle beneath the psychologically important $100 threshold amid conflicting signals from China’s steel sector.

The price action reflects a market caught between opposing forces. Chinese steel production has shown surprising resilience with a 1.1% year-over-year increase in Q1 2025 despite ongoing property sector challenges.

Daily steel output reached 2.8 million tonnes in early May, up from 2.6 million in January, while steel inventories sit at just 11.6 million tonnes – the lowest for this time of year since 2016.

“The steel sector is demonstrating impressive resilience despite property sector headwinds,” noted Daniel Morgan, commodities analyst at UBS. This resilience stems primarily from infrastructure spending and manufacturing growth offsetting construction weakness.

Supply constraints have provided price support throughout early 2025. Severe cyclones disrupted Australian Pilbara exports, reducing shipments by approximately 15 million tonnes.

Rio Tinto faces quality issues with its flagship product, with Pilbara Blend fines being downgraded from 61.6% Fe to 60.8% Fe for the third quarter. The technical picture shows iron ore trapped in a consolidation pattern.

Iron Ore Market Update

The price currently trades between the 78.6% Fibonacci level ($98.85) and the 38.2% level ($104.20). The completion of a bearish “Evening Star” reversal pattern recently pushed prices back below $100, with the 50-day moving average now serving as a critical support level.

Wednesday’s trading saw modest activity with 389,176 lots changing hands on the Dalian Commodity Exchange. The most active contract for September 2025 delivery gained 5.5 yuan to close at 728.5 yuan per tonne.

Market positioning shows physical participants maintaining short positions while money managers have switched from net short to net long over the past six weeks.

Chinese steel mills have adopted just-in-time purchasing strategies, reducing average inventory levels to 28 days from 35 days in early March.

Combined port inventories stand at 138 million metric tons, well above the 135 million ton threshold that typically triggers panic buying. This supply cushion has limited both downside and upside volatility.

Looking ahead, analysts remain divided on iron ore‘s prospects. UBS forecasts “a moderate surplus in 2025 and prices holding up around $95-100/t.” The market awaits fresh Chinese economic data and potential stimulus measures that could provide clearer direction.

For now, iron ore remains range-bound, with $95.40 representing key support and $104.20 serving as resistance. The current price action suggests traders are cautiously watching for China’s next policy move before committing to a decisive position.

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