Iron ore prices fell before the Chinese New Year, but data indicate an improvement in the supply surplus [SMM Brief Review].

Today, iron ore futures fluctuated downward, with the most-traded contract I2605 closing at 746 yuan/mt, down 2.36% from the previous trading day. Spot prices fell 9–11 yuan/mt compared to the previous trading day. Traders showed low enthusiasm in offering prices, and steel mills had limited inquiries. Overall market trading activity remained sluggish.

In this period, total iron ore port inventories at 35 ports reached 152.93 million mt, down 191,000 mt MoM, while port pick-up volume reached 2.585 million mt, up 90,000 mt MoM. The decline in inventories combined with the rebound in port pick-ups indicates marginal improvement in the previously sustained loose supply situation.

However, with the approaching Chinese New Year holiday boosting risk-off sentiment, pre-holiday capital mostly chose to take profits and exit. The withdrawal of futures capital led to a noticeable correction in futures prices, which in turn dragged spot prices lower through the futures-spot linkage mechanism.

Looking ahead to the post-holiday market, considering that steel mills will maintain normal production during the holiday and continue to consume in-factory inventory, post-holiday raw material restocking demand is expected to be released intensively. Driven by both the recovery in rigid demand and marginal improvement in fundamentals, iron ore prices are expected to see a corrective rebound after the Chinese New Year, likely fluctuating upward. [SMM Steel]