Iron ore futures have experienced a boost following China’s announcement of a new strategy to address overcapacity in its steel industry. China, the world’s largest consumer of iron ore, has outlined measures aimed at capping the steel sector’s expansion, leading to positive market reactions. The Ministry of Industry and Information Technology plans to limit the annual growth of the steel sector’s added value to approximately 4 per cent for both 2026 and 2027.
According to ANZ, the new regulations will prevent steel manufacturers from increasing production capacity. Companies will be required to expedite the removal of outdated blast furnaces and converters. ANZ strategists Brian Martin and Daniel Hynes noted that the anticipation of reduced crude steel supply has elevated steel prices, creating an environment for iron ore prices to increase. They also pointed out that reduced iron ore supply contributed to the price support.
Iron ore futures on the Singapore Exchange were trading at around $US106 per tonne. This increase reflects market optimism in response to China’s policy shift. Investors are anticipating that the new measures will lead to a more balanced supply-demand dynamic in the steel and iron ore markets. The move could signal a period of stabilisation and potential growth for iron ore prices, benefiting major producers and related industries.
This development is particularly significant considering China’s dominant position in the global steel and iron ore markets. Any policy changes in China tend to have far-reaching effects on global commodity prices. The measures are designed to promote sustainable development and reduce environmental impact by eliminating outdated technologies and controlling overall steel production.
