China's state-linked iron ore buyers have notified certain steel mills to suspend purchases of Rio Tinto's Pilbara blend fines, as contract negotiations with the Australian mining giant enter a critical stage.
Market chatter suggests a 1.8% reduction in long-term contract discounts for iron ore, directly lowering raw material costs and adding pressure on ore prices. Steel mill profitability has slipped to just 7.79%, with some regional mills receiving verbal guidance to temporarily cut blast furnace hot metal output, creating a bearish signal for raw materials.
Prior to the holiday period, steel mills had been actively rebuilding iron ore inventories, possibly completing their stockpiling early. As a result, the restocking window next week may fall short of expectations, intensifying the negative feedback loop. While inventories at China's 45 major ports have eased slightly from highs, offering marginal short-term relief, they remain in elevated territory, and the overall supply-demand landscape stays loose.
Downstream construction sites and manufacturers are showing very weak purchasing appetite, mostly buying on a need-by-need basis, which keeps iron ore trading in a weak, rangebound pattern.
Turning to the coking coal and coke sector, production areas are keeping operations running through the holiday period with full focus on supply guarantees, resulting in a notable uptick in coal supply. Steel mill profitability has dropped to 7.79%, and some regional mills have received verbal directives to reduce hot metal output, weighing on raw material demand.
Coking coal supply is recovering marginally, and with mills under losses, negative feedback expectations are building. Mine raw coal output has climbed back above 1.59 million tonnes, with operating rates returning to 70%. On the coke side, producers have launched a fifth round of price hikes, driven passively by rising coal costs, yet they remain in deep loss territory. Constrained by losses, coke plants are stepping up involuntary output cuts, tightening coke supply in tandem.
Hot metal production remains elevated, but the sharp drop in mill profitability caps upside potential for raw material prices. Terminal demand has limited capacity to absorb higher costs, leaving coking coal and coke facing continued adjustment pressure.
In the flat glass market, September saw limited cold repairs, with furnace repairs and cold restarts running in parallel, turning market sentiment bearish on supply. Given the significant supply-demand uncertainty, glass pricing catalysts are numerous. On a medium-term basis, carbon reduction policies could provide support on both the supply and cost fronts, leaving room for price upside.
Flat glass producers remain locked in losses with weak profitability, keeping overall capacity near multi-year lows. Cash flow costs stand at around 940 yuan for coal-based production, 950 yuan for petroleum coke-based production, and roughly 1,130 yuan for natural gas-based operations. The current glass market is driven by multiple variables, with catalysts scattered across supply, demand, and policy shifts.
Over the medium term, carbon reduction policies are expected to bring beneficial impacts on supply and costs, opening up potential for upward price movement. Meanwhile, the property sector has unveiled a package of supportive measures, including extending mortgage loan terms from 30 to 40 years, backing listed developers with a wider range of financing tools, and mandating that presales only commence after structures reach their rooftop stage. These moves have restored market confidence in future demand. For now, the market's response to property stimulus is primarily playing out through valuation recovery.