- Improved mid-grade buying raised market levels
- Weak mill margins and cautious portside buying cap the upside
The recent rise in iron ore prices appears to have been driven more by improved sentiment across the broader ferrous complex than by a strong recovery in underlying steel demand. Higher steel and coke prices, along with increased fund activity around the ferrous chain, provided support to seaborne iron ore.
Liquidity was largely concentrated in medium-grade mainstream fines, while demand for lump ore also showed improvement. A higher share of lump usage in blast furnaces has supported buying interest for both mainstream and non-mainstream lump supplies, pushing prices higher.
However, physical demand remains relatively weak. At Chinese ports, mills continued to buy cautiously as poor steel margins limited their willingness to pay higher prices. The latest increase in coke prices has further squeezed profitability, making mills more resistant to rising iron ore costs.
Mills therefore remained cautious about the sustainability of the current rally. With prices already moving higher, scope for fresh bottom-fishing has diminished, and iron ore could eventually move back towards fair value if the improvement in sentiment is not backed by stronger physical demand.
DCE iron ore futures: October 2026 iron ore futures on the Dalian Commodity Exchange (DCE) gained slightly to RMB 727.5/t on 25 August, indicating mildly positive sentiment.
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