- Limited low-grade availability increases acceptance of discounted grades
- Weak mill margins weigh on demand for premium iron ore
Iron ore fines (Fe 61%) spot prices edged up marginally by $1/dmt d-o-d to $100/dmt CFR China on 4 September 2026. The marginal increase came despite subdued activity in the primary market, with more transactions heard in the secondary market at discounted levels. Buying interest remained selective as Chinese steelmakers continued to face pressure on margins and closely managed raw material inventories.
Market observed decent demand for premium low-alumina Brazilian ores as mills looked to contain procurement costs. With low-grade material remaining difficult to source, some buyers have shown greater willingness to use discounted higher-alumina brands. Mills are increasingly considering these grades as economical substitutes, particularly as alternatives in the low-grade segment remain limited.
Meanwhile, secondary-market activity remained soft, with some seaborne blend fine trades heard at discounted levels. High derivatives prices have continued to put pressure on import margins, prompting mills to adopt a wait-and-watch approach. As per reports, mills are currently maintaining normal inventory levels and are likely to increase purchases when prices soften, while holding back when prices move higher. Ahead of the National Day holiday, restocking is expected to be built up gradually, with mills likely to assess finished steel sales before committing to larger iron ore purchases.
On the supply side, lower inventories at Chinese ports provided some underlying support to prices. Port stocks declined mainly due to weaker arrivals following repeated typhoon-related disruptions to port operations. At the same time, blast-furnace production recovered marginally after declining for two consecutive weeks, while average capacity utilisation also improved. However, the recovery in demand remained insufficient to generate a stronger price response, as physical procurement activity weakened sharply.
Overall, market sentiment remained fragile as fundamentals continued to point to limited upside. Narrowing steel margins, cautious restocking and subdued physical demand are likely to keep buyers price-sensitive, despite lower port inventories and temporary supply disruptions.
DCE iron ore futures remain supported
January 2027 iron ore futures on the Dalian Commodity Exchange (DCE) rose by RMB 7/tonne (t) ($1/t) d-o-d to RMB 726.5/t ($107/t) on 5 September. The rise was supported by expectations of relatively stable near-term steel demand and improving blast-furnace utilisation. However, the strength in futures has yet to translate into a meaningful improvement in physical procurement, keeping the spot market outlook cautious.
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