Iron ore prices are on track for their first consecutive monthly advance this year, lifted by expectations of steel production cuts in China and firmer sentiment in the metals market.
Benchmark futures in Singapore held steady near $104 a tonne, bringing August’s gains close to 5%. Contracts in Dalian, priced in yuan, are also set for a third straight monthly rise, marking the strongest run since late 2024.
Prices spiked nearly 2% on Thursday after a Reuters report said Beijing is preparing to strictly curb steel capacity and limit output in 2026. While lower steel production might normally weigh on demand for iron ore, analysts note that tighter supply could improve margins at China’s struggling steel mills and help stabilise steel prices.
Tangshan output cuts offer support
The rally echoes recent gains sparked by output restrictions at mills in Tangshan, a major steelmaking hub. Those measures, linked to efforts to cut pollution ahead of a military parade in Beijing in early September, have buoyed market sentiment by suggesting Beijing remains willing to intervene in the sector.
Outlook: cautious optimism
This would mark the first back-to-back monthly gain for iron ore since 2024. Still, analysts caution that the upside is capped by a fragile macroeconomic outlook in China and uncertainty over the scale and duration of the government’s planned output controls.
“The growth stabilization document released this year is similar to the one issued in 2023 and lacks clear policy objectives,” said Steven Yu, a researcher at Mysteel, noting that markets are waiting for stronger policy signals.
Inventory and demand signals
Mysteel data this week showed that demand and stock levels across five major steel products remain balanced, a positive sign heading into the peak construction season in September and October. Figures from the China Iron and Steel Association also revealed that inventories at large steel mills rose in mid-August, though analysts say the increases remain manageable.
With sentiment improving but uncertainty still lingering, iron ore’s rally reflects both optimism about steel sector reforms and caution over China’s broader economic trajectory.