• Momentum on iron ore prices has remained firm this week despite investors’ growing concern over China property sector.
• The spot price on benchmark IO 62% FE has been gradually reaching new highs in January despite the recent market turmoil and is up 60% since its November lows.
• The chart below shows the strong divergence between iron ore prices and Evergrande ST bonds, which keep trading at ‘depressed’ levels this month (i.e. June 2025 bond is currently trading at 15cents on the dollar).
• We previously saw that part of the plunge in iron ore prices in H2 2021 was linked to the government crackdown on the real estate market, which has been a strong buyer of steel.
• However, recent gains in the commodity have been partly attributed to the renewed supply disruptions in top exporter Australia.
• In addition, the announcement of further easing measures from China officials and the potential reversal in ‘liquidity’ (TSF 12M sum) could continue to support some commodities heavily depending on China demand (such as iron ore).
• Next resistance to watch on the topside stands at 140.80, which corresponds to the 38.2% Fibo retracement of the 80.40 – 238.60 range.

Source: Bloomberg/MNI