Iron ore prices edged slightly lower on June 25, with SGX 62% Fe futures settling at $100.53 per tonne, a modest $0.25 decline amid subdued trading volumes. Dalian Commodity Exchange futures fell 0.6% to 802 CNY/t. The broader trend remains range-bound between $98 and $105, with no clear directional catalyst emerging.
The primary driver of iron ore weakness is the compression of steel mill margins in China, the world's largest steel producer. Chinese hot rolled coil margins narrowed to approximately $15/ton in June, down from $20/ton in May and $30/ton in Q1 2026. Rebar margins are even thinner at $8-10/ton. Thin margins reduce mills' incentive to produce, directly impacting iron ore demand.
China's port inventories rose to 152 million tonnes in the week ending June 21, up 1.2% week-over-week and at the highest level since March. Inventory levels at major Chinese ports are now 8% above the five-year average for this time of year. The inventory build is concentrated at the ports of Tangshan, Tianjin, and Qingdao — the primary distribution hubs for steel production.
The latest Chinese government stimulus measures have failed to provide the expected boost. The State Council announced a 1.2 trillion yuan package of measures on June 15, including infrastructure spending and consumer subsidies. However, infrastructure construction starts have not accelerated materially, and the property sector rebound remains elusive. New home sales were down 8% year-over-year in May.
On the supply side, Rio Tinto reported a 2% increase in Pilbara iron ore shipments for Q2 2026, in line with its full-year guidance of 330-340 million tonnes. BHP Group maintained its guidance at 282-288 million tonnes for the fiscal year. Vale reported a 2% decline in Q1 2026 production due to heavy rains in northern Brazil but maintained its 2026 guidance of 345-355 million tonnes. Total seaborne supply remains ample.
The $100 level has acted as psychological support for iron ore throughout June. Below $95, however, higher-cost Chinese domestic iron ore producers (average cost ~$85/t) would begin to curtail output, providing a floor under prices. Conversely, prices above $110 would incentivize non-core seaborne supply from India and Ukraine to return to the market, capping upside. The $95-$110 range is the medium-term equilibrium.
Iron ore in a $95-$110 range is a procurement zone where neither supply nor demand side is panicking. Chinese margins are the key watchpoint — if they compress below $10/ton across both HRC and rebar, expect production cuts that will weigh on iron ore. If you contract on CFR China terms, the current $99-101 range is fair for spot purchases. For term contracts, push for quarterly pricing based on the average of the preceding quarter, which would smooth out the current range.