Chinese media issues warning on ‘irrational’ iron ore spike

Iron ore prices have powered ~10% higher in just 10 days to top $100/ton despite persistent worries over prospects for Chinese demand, prompting the official journal of China’s metals industry to post a long article Thursday on why the gains are “irrational.”

“The current rise in iron ore prices lacks fundamental support,” and plentiful supply, weak demand, high inventories, and low mining costs should continue to weigh on iron ore for the rest of 2024, state-affiliated China Metallurgical News said, according to Bloomberg.

China’s steel sector is battling what top producer China Baowu Steel Group recently said were worse conditions than earlier crises in 2008 or 2015, and BHP (NYSE:BHP) said this week that iron ore has support in the $80-$100/ton range, a level at which many high-cost producers in China, India and elsewhere may need to consider halting production.

“Iron ore is prone to rise but resistant to declines – repeatedly devouring industry profits – and this year the situation is even worse,” China Metallurgical News wrote. “Looking back at the market situation in recent years, the above scenario seems to be constantly repeating itself.”

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