Iron ore futures have remained range-bound between $99 and $102/mt for 10 consecutive sessions, reflecting a market that is well-balanced in the near term but uncertain about the medium-term demand trajectory. The $100 level has acted as both support and resistance.
The physical market in China shows steady demand from mills that need to replenish inventories after running stocks down in late May. Iron ore arrivals at Chinese ports are running at 22.8 million tons per week, consistent with normal seasonal patterns.
However, the steel demand outlook beyond the immediate restocking cycle remains uncertain. Infrastructure investment, which accounts for 25% of Chinese steel consumption, is showing signs of acceleration following the issuance of 3.8 trillion yuan in local government special bonds, up 12% year-on-year.
The marginal cost of iron ore supply for most Australian and Brazilian producers is below $40/mt, meaning current prices generate healthy margins and provide no incentive for supply curtailment. This structural oversupply dynamic caps the upside for sustained price rallies.
China's scrap steel availability is increasing, with scrap consumption reaching 25 million tons in May, up 8% year-on-year. Each ton of scrap used in electric arc furnaces displaces approximately 1.6 tons of iron ore demand, a growing substitution trend.
The $100 level represents fair value in the current market. Use any dips below $98 for strategic additions to forward coverage. The scrap substitution trend is structurally bearish for iron ore demand, suggesting that long-term price averages may shift lower over 2027–2028.