Iron ore has drifted to $98/t CFR China, near the bottom of its 2026 trading range, as Chinese steel margins remain under pressure and seaborne supply continues flowing. The 62% Fe index hit a 10-month low of $99.2/t on June 26, down 7.9% from May, and has struggled to reclaim the $100 threshold.
Chinese steel demand is the story. Crude steel output fell 2.5% year-on-year in May 2026 to 84.4Mt, with rebar margins near decade lows. The steel sector PMI has remained in contractionary territory since April. Weak construction and cautious manufacturing are weighing on demand, particularly for lower-grade ores.
Supply is ample and growing. Seaborne arrivals into China are up 4.8% year-to-date to 636Mt by June. Australia remains the dominant exporter (923Mt in 2025), Brazil's Vale targets 335-345Mt in 2026, and Simandou in Guinea has shipped 7.4Mt since November 2025. The seaborne surplus is estimated at 30-75Mt annually.
Chinese port inventories have built to approximately 160Mt, near a five-year high. This abundant stock reduces mills' urgency to buy seaborne cargoes and caps any price rallies. Mills are operating with low-stock strategies, buying only on sharp dips.
Westpac forecasts 62% Fe averaging $97/t in the December quarter, underlining a high-$90s central case with downside bias. IndexBox expects $98-102/t in the near term absent demand improvement. The medium-term outlook is increasingly challenging as Simandou ramps up toward 120Mt annual capacity by 2030.
The bull case: Chinese stimulus boosts steel demand, supply disruptions in Australia or Brazil (cyclone, operational issues), or a sharp depreciation of the RMB makes seaborne ore more expensive. The bear case: Chinese steel exports face new tariffs, further compressing domestic margins and reducing iron ore demand. The base case: $90-$105 range through H2 2026, with bias toward the lower end as the surplus deepens.
Iron ore buyers have the upper hand. The market is in structural surplus with growing supply from three directions (Australia, Brazil, Simandou) and weakening Chinese demand. Do not rush to lock in long-term volumes at $100+. The risk is skewed to the downside toward $90 or lower as the Simandou ramp continues. Use short-term pricing mechanisms linked to monthly averages. The only upside catalyst is Chinese stimulus — the Politburo meeting at end-July is the key near-term event. If significant stimulus is announced, prices could spike 5-8% temporarily. But sell those rallies rather than chase them. For seaborne versus domestic procurement in China, the port inventory overhang means domestic ore faces more pressure than seaborne — adjust your sourcing mix accordingly.