Dancing, dancing, dancing! There is no stopping the iron-ore-crazy man.
Except for one small problem. Steel mill margins are being obliterated.
These developments will weaken the start of 2026 steel production, especially because steel product inventories are higher than last year.
And there is another problem. The iron-ore-crazy man is dancing on top of the largest pile of dirt anybody can remember, at 162.7mt.
This is where all the iron ore is going. Into a red Chinese mountain that is accumulating at an annualised rate of approximately 60 mt, a reasonable proxy for seaborne oversupply.
New supply from Simandou has begun to arrive slowly, owing to delays in its locomotive fleet. Even so, it managed two shipments in December, roughly 400k tonnes that will now add directly to the enormous pile.
The cadence of shipments will accelerate meaningfully in Q2 as more locomotives arrive. Although we may only do 15-20mt in total stock this year, by H2 it will be loading at a flow rate of double that, and that is what matters to prices.
Because the Chinese property market remains weak, investment is declining owing to anti-involution, and steel export growth is exhausted, China needs to quickly introduce a substantially larger stimulus package than last year; otherwise, additional iron ore will depress prices sooner rather than later.
Even so, my view remains that Chinese steel output will fall by another 3% this year as iron ore supply increases by another 20mt, doubling today’s iron ore surplus to well above 100mt.
It’ll take sub-$90 iron ore to clear that.
Dance on, iron-ore-crazy man!
