[SMM Analysis] Macro Support vs. Fundamental Pressure, Iron Ore Prices Continue to Move Sideways at Low Levels

Last week, iron ore prices consolidated on a weak note within a narrow range, with fluctuations in both domestic and overseas markets not exceeding 1.5%. Three main drivers were at play: First, pre-holiday restocking neared its end. With the Mid-Autumn Festival and National Day holidays approaching, steel mills had completed most of their raw material stockpiling, purchase willingness pulled back, and spot transactions were sluggish. Second, hot metal production continued to pull back. Steel mill losses intensified, leading to more blast furnace maintenance, and hot metal production extended its decline, suppressing ore demand. However, Brazil's ocean freight rates continued to shoot up, curbing shipments from some small mines, and market chatter increased, providing support to ore prices. Under these combined influences, iron ore prices maintained a "consolidate on a weak note" pattern.

Chart- MMI 61% Port Spot Index

Source: SMM

Chart- Domestic and Imported Ore Price Spread Widened Then Narrowed This Week, Expected to Widen Next Week

Outlook for Next Week

Outlook for This Week, pre-National Day holiday stockpiling gradually winds down, and steel mill restocking momentum tends to fade. In the first week after the holiday, although some restocking expectations remain, overall restocking volumes are expected to be notably lower than pre-holiday levels, providing weak support for ore prices. Based on SMM blast furnace maintenance tracking data, blast furnace maintenance volumes continue to increase in October, the decline in hot metal production is widening, and overall iron ore demand continues its downward trend. On the supply side, although high ocean freight rates in Brazil have somewhat curbed shipments from small mines in the region, considering that mainstream mines had end-of-quarter shipment pushes in September, coupled with growth in shipments from Guinea, overall iron ore supply growth is expected to expand, and port inventory buildup is likely to accelerate, pressuring ore prices. Additionally, pre-holiday capital withdrawal has led to shrinking liquidity, and overall sentiment in ferrous metals is bearish. However, the neutral-to-positive tone of China-US consensus may provide some boost to market sentiment and support ore prices. Overall, iron ore prices are expected to maintain a weak, narrow-range consolidation pattern before and after the National Day holiday. Going forward, close attention should be paid to whether hot metal production declines as expected, changes in end-use demand, and policy-related news disruptions.