Iron ore prices have pulled back to $102/t CFR China after hitting a 12-month high above $114/t in mid-May. The trigger is a combination of record-high port inventories and softer-than-expected Chinese steel demand. China port stockpiles stand at ~160 Mt, near the all-time record of 165.7 Mt set in March, signaling abundant supply.
China's steel market entered its seasonal weak period earlier than usual. Persistent rainfall and the early arrival of summer heat have slowed construction activity. April crude steel output fell 2.8% year-on-year to 83.6 Mt, the lowest April since 2018. Mills are limiting purchases to near-term requirements.
Seaborne supply is growing. Vale reaffirmed its 2026 guidance at 335-345 Mt, with Q1 output up 3% y/y. Vale raised its 2026 average price assumption to $112/t, above market consensus. Rio Tinto shipped its 8 billionth tonne from Pilbara in May, targeting 345-360 Mtpa medium-term. BHP maintained guidance at 258-269 Mt.
Simandou in Guinea is the structural wildcard. Exports nearly quadrupled from Q1 2026 to 2.2 Mt in May, signaling the project has moved from commissioning to genuine operational ramp-up. Consensus expects ~20 Mt from Simandou in 2026, ramping to 120 Mtpa by 2030. This would reduce the pricing power of Vale, Rio, and BHP over time.
The consensus forecast from major institutions centers on $94/t for 2026. Goldman Sachs at $93/t, J.P. Morgan and BMI at $95/t, Citi at $85/t, Vale itself at $100/t. The bear case rests on Chinese steel demand contracting 1-1.5% in 2026, rising Simandou supply, and record port inventories that provide no urgency for mill restocking.
The iron ore market is structurally softening. Port inventories at record levels mean mills can buy hand-to-mouth without supply risk. The consensus call for $94/t average in 2026 suggests current $102/t has room to fall. Buyers should avoid locking in term volumes at current levels and favor spot purchases — the risk is to the downside. Watch Simandou's monthly export trajectory as the key supply-side indicator.