Iron Ore Slips Under $100 as Oversupply and Seasonal Weakness Deepen Pressure

Gerik

Summary:

Iron ore prices fell below $100 a ton as Chinese demand softened ahead of the Lunar New Year and rising inventories reinforced concerns that market fundamentals remain weak....

Prices Break Key Threshold Amid Prolonged Downtrend

Iron ore futures dropped below the $100-a-ton mark, extending their decline for a fourth consecutive week, the longest losing streak since June. Futures for 61% iron-content material fell as much as 1.1% to $99.55 a ton in Singapore trading, underscoring persistent downside pressure. This move places iron ore back below a psychologically important level that had last been breached in August, although that earlier dip was based on higher-grade 62% material.

The price weakness reflects not a sudden shock but a continuation of deteriorating fundamentals, as demand indicators fail to offset ample supply.

China Demand Softens Ahead of Lunar New Year

Demand conditions in China weakened as steel producers scaled back activity ahead of the week-long Lunar New Year holiday starting in mid-February. Hot-metal output at Chinese mills grew more slowly than expected, signaling muted steel production momentum at a time when restocking activity has already ended. Seasonal restocking typically offers price support, but its conclusion has removed a key buffer against falling prices.

This slowdown is causally linked to the timing of the holiday and broader caution among steelmakers, rather than a temporary logistical disruption.

Rising Inventories Reinforce Bearish Fundamentals

Iron ore stockpiles at Chinese ports and mills continued to climb, reinforcing the perception of an oversupplied market. Port inventories rose for a tenth straight week, increasing 0.6% to 160 million tons, according to data from a sample of ports. This marks the highest level since 2022 and brings holdings close to the record reached in 2018.

The accumulation of inventories reflects both slower downstream consumption and steady inflows of seaborne supply. It may also partly reflect the impact of a pricing dispute between BHP Group and China Mineral Resources Group, which has affected shipment flows and stock management decisions.

Supply Growth Adds Structural Pressure

On the supply side, iron ore availability continues to expand. Major miners in Australia and Brazil have increased production, while additional volumes are expected as new projects come online. Notably, the Simandou project in Guinea is scheduled to ramp up this year, adding further supply to the seaborne market.

Together, these developments point to a structural oversupply situation rather than a short-term imbalance, amplifying downward pressure on prices.

Weather Disruptions Offer Limited Relief

There were some short-term logistical developments, with Pilbara Ports in Australia announcing that berths at key export hubs such as Port Hedland, Dampier, and the Ports of Ashburton would be cleared due to an approaching storm. While gales and faster-than-expected storm development could temporarily affect shipments, the market reaction suggests such disruptions are insufficient to materially tighten supply under current conditions.

With weak steel demand, elevated inventories, and expanding global supply, iron ore market fundamentals remain under pressure. The fall below $100 highlights how the balance of risks continues to skew to the downside unless a meaningful rebound in Chinese steel demand or a sustained supply constraint emerges in the coming months.

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