Northern Environmental Protection-Driven Production Restrictions Cause Iron Ore Prices to Plummet [SMM Commentary]

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Today, DCE iron ore futures extended last week's decline. The most-traded I2505 contract closed at 779.5 yuan/mt, down 2.81% for the day. Traders showed moderate willingness to sell; steel mills purchased as needed, mainly adopting a high-frequency, low-volume purchasing strategy; the market transaction atmosphere was average. In Shandong, the mainstream transaction prices of PB fines were 780-790 yuan/mt, down 10-15 yuan/mt from last Friday; in Tangshan, PB fines transaction prices were around 795-800 yuan/mt, also down 10-15 yuan/mt from last Friday. According to SMM shipping data, last week, iron ore shipments from Australia and Brazil rebounded significantly to a yearly high, with global shipments up 37.7% WoW. Despite a port arrivals decline of 11%, the future supply remains ample. Ahead of the Two Sessions, coupled with severe smog expected in north China, Tangshan took the lead in issuing production restriction notices, with some steel mills conducting blast furnace maintenance, potentially further reducing pig iron production. Under the dual pressure of increased supply and weakened demand, iron ore prices saw a significant decline. Considering the production restriction policy backdrop, the market holds weak expectations for any surprising policies during the Two Sessions, and short-term ore prices are expected to continue fluctuating downward without significant rebound opportunities.