Iron Ore Prices Edge Higher on Trade Truce Optimism Amid Persistent Demand Concerns

Iron ore futures climbed to a two-week peak early Tuesday, buoyed by temporary U.S.-China tariff reductions, before paring gains as skepticism over sustained demand resurfaced.

The benchmark Iron Ore 62% Fe, CFR China (TSI) Index traded at ¥99.75 per metric ton by mid-morning, up 1.22% from Monday’s close, while Dalian Commodity Exchange’s September contract rose 1.56% to ¥718 ($99.82).

Prices retreated from session highs of ¥727 and $100.35 as traders weighed mixed fundamentals: improved trade sentiment against looming steel production cuts and record-high Chinese port inventories.

The U.S.-China agreement to slash tariffs-Washington reduced duties from 145% to 30%, Beijing from 125% to 10%-initially fueled a broad commodity rally.

Iron ore’s gains mirrored silver’s 1.69% surge to $33.12/oz and copper’s 0.24% uptick, driven by optimism for industrial demand. Yet momentum faltered as analysts noted China’s steel mills are delaying restocking ahead of anticipated mid-May production curbs.

Inventories at Chinese ports swelled to 138 million metric tons, their highest in over two years, while weekly Australian shipments held steady at 16.5 million tons. Technically, iron ore faces conflicting signals.

Steel and Silver Outlook Amid China’s Economic Pressures

The Relative Strength Index (RSI) at 60 suggests neutral momentum, while the Moving Average Convergence Divergence (MACD) hints at short-term bullishness.

Immediate resistance sits at $100.20, with critical support at $95.40-a break below could trigger accelerated selling. Trading volumes remained subdued at 277,590 open contracts, reflecting market caution.

Fundamentally, China’s property sector remains a drag. Property investment fell 10.1% year-on-year, and new construction starts contracted 22.2%, pressuring steel demand.

Despite the People’s Bank of China’s liquidity injections-a 50-basis-point reserve ratio cut freeing ¥1 trillion-steelmakers are opting for just-in-time purchasing, slashing inventory buffers to 28 days from 35 in March.

Globally, silver’s 14.67% yearly gain underscores its dual role as a monetary and industrial asset. MCX July silver futures hit ₹96,871/kg, buoyed by solar panel and electronics demand. Iron ore’s outlook stays clouded.

Trading Economics projects a slide to $91.09 within a year, while Wood Mackenzie sees $99 in 2025, dropping to $95 in 2026. With Guinea’s Simandou mine set to add 120 million tons annually by 2028, supply pressures may intensify.

Market participants now eye China’s steel output guidelines, expected by June, which could cement production cuts and redefine demand trajectories. For now, iron ore treads a fragile path-lifted by trade détente but anchored by structural oversupply and faltering consumption.

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