The iron ore market is showing signs of a tentative stabilization. Driven by tighter coking coal supply in China, which pushes up steelmaking costs, combined with early indications of improved downstream demand, iron ore futures have reclaimed the triple-digit price level, though opinions remain divided on whether this rebound can be sustained.
This week, iron ore futures in Singapore broke through the $100 per tonne mark, hitting their highest point since mid-July. The tightening of coking coal supply has lifted rebar and hot-rolled coil prices to multi-month highs, strengthening the overall cost support across the steel supply chain, which in turn has benefited iron ore prices.
Rafael Barcellos, head of Latin America metals, mining, and pulp and paper equity research at Bradesco BBI, noted in a report last week that his team had previously predicted a bottom in iron ore prices. The current trajectory is validating that call, and he expects the upward momentum to continue given solid cost-side support and improving downstream conditions. Adding to the positive sentiment across the metals complex, London copper futures hit a record high of $14,530 per tonne on Monday.
Rising Steel Costs From Tighter Coking Coal Lift Mill Prices to Multi-Month Highs
The immediate catalyst for the iron ore rebound stems from the supply squeeze in coking coal. Rafael Barcellos highlighted in his research note that the tightening coking coal supply is effectively underpinning steel prices, with rebar and hot-rolled coil both reaching multi-month highs. Stronger steel prices have improved profitability for mills, which is now transmitting support upstream to iron ore.
Looking at the fundamental picture, iron ore inventories have been declining, spot trading activity among Chinese steel traders has picked up for the second consecutive week, and mill profit margins are showing signs of recovery. These indicators collectively point to a marginal improvement in market sentiment.
However, blast furnace operating rates have fallen for a second straight week, adding a note of caution to the recovery narrative and suggesting that a substantive turnaround in demand has yet to be fully realized.
Signs of Improving Downstream Demand Backed by Manufacturing PMI Data
Beyond cost support, the demand side is also flashing positive signals. Rafael Barcellos cited China's August manufacturing Purchasing Managers' Index as another encouraging economic indicator, arguing that it helps reinforce expectations of a seasonal recovery in downstream demand.
The improving conditions in the steel downstream sector are providing additional support for iron ore prices. As the seasonal peak demand period approaches, market participants are closely watching whether demand can generate sustained growth momentum to help iron ore hold firmly in the triple-digit range.
Barcellos had previously taken a distinctly bullish stance on the bottoming opportunity in iron ore, and he points to the current price rebound as confirmation of that thesis. Within the dual framework of cost support and downstream improvement, his overweight stance on related names remains unchanged. The recapture of the $100 level has prompted the market to reassess whether iron ore has completed its bottoming process. That said, analysts generally agree that the price's ability to stay in the triple-digit range will ultimately hinge on whether China's downstream demand can evolve from a seasonal improvement into a more sustained trend.