Rising Iron Ore Prices in China: A Solid Foundation for Optimism


The price of iron ore in China has been steadily increasing, receiving strong support from the underlying market. This positive trend continued on Wednesday as the iron ore futures contracts traded on the Dalian Stock Exchange experienced further gains. Despite low inventory levels, investors remained optimistic about the short-term demand, contributing to the overall positive sentiment within the market.

The most actively traded iron ore in Dalian concluded the day’s trading with a significant gain of 2.12%. This surge brought the price to 866 yuan per metric ton, marking the highest price achievement since September 25th. Analysts from Shengda Futures, in one of their notes, highlighted that despite the recent decrease in the production of hot metals, the rate of decline remains slow. Furthermore, the current production level is still relatively high within the given period. Their note predicted, “A daily production of hot metals is likely to fall to 2.42 million tons by the end of October and recover to around 2.45 million tons, providing strong support for steelmaking raw materials.”

China’s iron ore imports, driven by solid demand, have reached an all-time high of 876.65 million metric tons during the first nine months of 2023, according to data from the customs office. This figure sets a new record for the country, demonstrating its significant role in the global iron ore market. These imports have been boosted by increased production at the Gudai-Darri mine, which belongs to Rio Tinto, the world’s largest producer of iron ore. Rio Tinto (LON:RIO) reported a 1.2 percentage point increase in its shipments of iron ore during the third quarter, attributing this growth to enhanced production at their mine.

Moreover, the demand for aluminum has also played a role in driving investor optimism. The data provided by the consulting firm Mysteel revealed that daily transaction volumes for aluminum products used in construction increased significantly, reaching 208,200 metric tons on Tuesday. This milestone represents the highest level reached since May and indicates a positive outlook for the aluminum industry.

The surge in the iron ore market can be attributed to several factors. One crucial factor is the recovery of the global economy, which has led to a greater demand for raw materials used in construction and other industries. As countries invest in infrastructure projects and manufacturing activities resume, the need for iron ore and aluminum increases.

Furthermore, environmental policies implemented in China have led to a reduction in the production of hot metals. This production restriction, combined with solid demand, has resulted in a significant price increase for iron ore. As a result, manufacturers and investors are closely monitoring the market, seeking opportunities to benefit from this upward trend.

The positive sentiment in the iron ore and aluminum markets can be seen as an indicator of a broader economic recovery. Rising prices indicate increased economic activity and demonstrate the resilience of the Chinese market. For investors and businesses operating in these industries, this growth presents a favorable environment for profit generation and expansion.

In conclusion, the price of iron ore in China continues to rise, backed by strong support from the underlying market. The iron ore futures contracts traded on the Dalian Stock Exchange have experienced further gains, reflecting investors’ optimism about short-term demand prospects. Despite low inventory levels, the market has shown positive sentiment. The rise in iron ore prices has been supported by several factors, including increased production at key mines and sustained demand for raw materials used in construction and manufacturing. Additionally, the demand for aluminum has also played a role in driving market optimism. Overall, these trends indicate a broader economic recovery and present significant opportunities for investors and businesses in the iron ore and aluminum industries.