Tightening coking coal supply coupled with improved demand drove iron ore futures to strongly recover the $100 mark.

The iron ore market has shown signs of stabilizing. Driven by both tightening coking coal supply in China pushing up steelmaking costs and initial signs of improving downstream demand, iron ore futures prices have returned to the triple digits. However, there is disagreement in the market about whether this rebound can be sustained.

This week, Singapore iron ore futures prices broke through $100 per ton, reaching a new high since mid-July. Tightening coking coal supply drove rebar and hot-rolled coil prices to multi-month highs, strengthening overall cost support for the steel supply chain, which in turn benefited iron ore prices.

Rafael Barcellos, Head of Latin American Metals & Mining and Pulp & Paper Equities at Bradesco BBI, noted in a research report last week that his team had previously predicted iron ore prices had bottomed out, and current price movements are confirming this assessment. He expects the price rebound to continue, supported by solid cost levels and improving downstream conditions. Meanwhile, London copper futures also hit a record high of $14,530 per ton on Monday, indicating a generally positive sentiment in the metals sector.

Tightening coking coal supply boosted steelmaking costs, pushing steel prices to multi-month highs.

The immediate trigger for this round of iron ore rebound came from the tightening of coking coal supply. Rafael Barcellos pointed out in a research report that the tightening coking coal supply is effectively supporting steel prices, with both rebar and hot-rolled coil prices rising to multi-month highs. The stronger steel prices, in turn, improved steel mill profit margins and transmitted this support upstream to iron ore.

From the perspective of supply and demand fundamentals, iron ore inventories continued to decline, spot trading activity among Chinese steel traders rebounded for the second consecutive week, and steel mill profit margins also recovered. Multiple indicators point to a marginal improvement in market sentiment.

However, the blast furnace operating rate declined for the second consecutive week, adding some uncertainty to the current recovery picture and indicating that the substantial recovery in demand has not yet been fully realized.

Initial signs of improvement in downstream demand are emerging, supported by the manufacturing PMI.

In addition to cost-side support, positive signals have also emerged on the demand side. Rafael Barcellos listed China's August manufacturing purchasing managers' index as another encouraging economic signal, believing it helps strengthen market expectations for a seasonal recovery in downstream demand.

Improved conditions in the downstream steel industry are providing additional support for iron ore prices. With the peak seasonal demand approaching, the market is closely watching whether demand can sustain its growth momentum and keep iron ore prices in the triple digits range.

Barcellos previously expressed a strong bullish view on iron ore prices bottoming out in its research report, noting that the current price rebound validates this assessment. Under the dual logic of cost support and improved downstream demand, its overweight position on related stocks remains unchanged. The recapture of the $100 mark has led the market to reassess whether iron ore has completed its bottoming process. However, analysts generally believe that whether prices can stabilize in the triple-digit range ultimately depends on whether Chinese downstream demand can evolve from seasonal improvement to a sustained growth trend.

Risk Warning and DisclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.