Iron Ore Decline Pressures Steel Market Ahead of Lunar New Year

Industry Insights from Next Move Strategy Consulting

Iron ore futures continued their downward trend on Tuesday, following a broad commodities selloff in the previous session. The decline reflects sluggish steel demand in China as mills prepare for the upcoming Lunar New Year holiday, coupled with environmental regulations and weaker domestic consumption.

Market Dynamics and Price Movements

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) fell 1.21% to 777 yuan (USD 111.97) per metric ton as of 0246 GMT. Similarly, the benchmark March iron ore contract on the Singapore Exchange dropped 0.84% to USD 102 per ton. Monday’s sharp price falls mirrored declines across commodities, including gold and silver. Transaction volumes at major Chinese ports also declined on Monday, according to consultancy Mysteel. Many steel mills have announced maintenance plans ahead of the nine-day Lunar New Year holiday, which begins February 16. Production is expected to resume in late February or early March, tempering feedstock demand as hot metal output slows. Global iron ore shipments increased from January 26 to February 1, with Australia and Brazil collectively adding 1.267 million tons during this period. Meanwhile, inventories at major Chinese ports rose 1.16% week-on-week, Steelhome data revealed on January 30.

Steel Production and Market Outlook

A combination of production curbs due to environmental regulations and soft domestic demand is expected to keep pressure on iron ore prices over the coming months, according to BMI, a Fitch Solutions unit. Nevertheless, a resilient global economy is likely to support Chinese steel exports, providing a price floor. Other steelmaking inputs also weakened on the DCE, with coking coal down 1.37% and coke falling 0.49%. Shanghai Futures Exchange steel benchmarks mirrored this trend: rebar dropped 0.51%, hot-rolled coil lost 0.37%, wire rod decreased 0.26%, and stainless steel declined 0.26%.

Next Move Strategy Consulting’s Analysis

Next Move Strategy Consulting’s view, notes that iron ore and steel markets are entering a transitional period, influenced by seasonal production slowdowns and regulatory constraints. While short-term price pressures are evident, export resilience and global demand fundamentals suggest that markets will retain underlying stability. Steelmakers navigating this period should focus on operational flexibility, inventory management, and strategic procurement to mitigate volatility. Iron ore’s current trajectory underscores the interplay of domestic production cycles, regulatory oversight, and global trade flows dynamics that will continue to shape steel market performance in the near term.

Source: Business Recorder

Prepared by: Next Move Strategy Consulting