Arrivals at ports fell for three consecutive weeks, but port inventories built up; expectations of hot metal bottoming out struggle to offset pressure from high inventory [SMM Iron Ore Daily Review]

Today, the most-traded DCE iron ore contract I2701 closed at 671.5 yuan/mt, down 0.37% from the previous trading day. It has now fallen for four consecutive trading days this week, cumulatively down 31 yuan/mt from the last trading day before the holiday (September 30). Today, spot prices at Qingdao Port fell by an average of 3-4 yuan/mt. Trader quoting enthusiasm was moderate, steel mills purchased as needed, and overall market trading was sluggish.

From a fundamental perspective, demand is at a phased low. Daily average hot metal production at 242 steel mills fell to 2.352 million mt, down 36,200 mt from before the holiday. This week's impact from maintenance was 1.9011 million mt, expanding for three consecutive weeks. However, after two rounds of coke price cuts, immediate profit for long-process rebar has recovered from -179.79 yuan/mt before the holiday to -68.12 yuan/mt. As maintenance gradually concludes, hot metal output is expected to rebound slightly, but steel mills' willingness to expand production remains weak.

On the supply side, the first port data after the holiday showed inventory buildup. On October 15, SMM inventories of ten ports totaled 105.14 million mt, up 2.12 million mt from before the holiday, mainly driven by buildup of coarse fines and lump ore. However, China's port arrivals have declined for three consecutive weeks, which should ease subsequent arrival pressure, though existing inventory pressure will remain difficult to digest in the short term. Overall, hot metal output is expected to bottom out and rebound, but upside is capped by high inventories, and ore prices are likely to remain weak and move sideways. [SMM Steel]