This year, iron ore has been one of the commodities with significant price declines. However, on Monday, boosted by rising global steel production, iron ore futures rebounded strongly and crossed the $100 per ton threshold. Despite the recovery, trade tensions between the US and China, particularly with the incoming Trump administration, are expected to weigh on further price gains.
The main iron ore futures contract on China’s Dalian Commodity Exchange (DCE) closed up 0.84%, at 781.5 yuan per ton (approximately $107.88 per ton). Earlier on Monday, the contract climbed as high as 791 yuan per ton, its highest level since November 8. Similarly, the December iron ore futures contract on the Singapore Exchange (SGX) rose 1.61%, to $102.2 per ton.
China, the world’s largest producer, consumer, and importer of iron ore, imports more than 1 billion tons of the commodity annually. As the primary raw material for steel production, any anticipated changes in steel output tend to directly influence iron ore prices. From January to October this year, China’s crude steel production totaled 850.73 million tons, a 3.0% year-on-year decline, while pig iron production fell 4.0% to 715.11 million tons.
However, according to data released last Friday by the World Steel Association, global crude steel production in October rose 0.4% year-on-year to 151.2 million tons. Meanwhile, China’s crude steel production for the same period grew 2.9% year-on-year to 81.9 million tons, signaling a recovery in the sector.
Beyond steel production, inventory levels at steel mills also impact iron ore prices. If steel inventories are low, mills may increase iron ore purchases to ramp up production, pushing prices higher. Analysts at Westpac believe that robust steel exports have contributed to a decline in Chinese steel inventories, which has helped sustain iron ore prices above $100 per ton.
However, in the trade arena, Chinese exporters and policymakers are bracing for potential challenges. US President-elect Donald Trump has threatened to impose tariffs exceeding 60% on all Chinese goods. Economists surveyed by Reuters predict that Chinese exports to the US could face tariffs as high as 40% next year, potentially shaving up to 1% off China’s economic growth.
Adding to the trade tensions, the US government announced last Friday it would ban several Chinese imports, including iron ore.
