CRU: Iron ore to remain resilient while coking coal under downward pressure

For the next month, CRU forecasts that global demand for steelmaking raw materials will increase month on month (m/m).

In China, steel end-use demand will see a seasonal pickup, though the improvement will be moderate. Demand from the manufacturing sector only weakened slightly during the typical slack season, implying limited upside potential.

Meanwhile, the construction sector shows no signs of meaningful recovery, limiting the growth of demand for steel as weather conditions improve. Pre- ‘Golden Week’ restocking usually boosts spot demand towards the end of September, but the currently high steel inventories will undermine restocking efforts.

Without concrete demand support and given that hot metal output is already high, further increases in demand for bulk raw materials will be limited. A significant contraction in hot metal output also appears unlikely as steel margins remain positive.

In short, bulk raw materials demand in China will be largely stable m/m. The key downside risk comes from the government’s crackdown on ‘tax evasion’ exports and the prospect of new trade measures from importing countries.

In India, steel demand is expected to pick up from late September when infrastructure projects restart following the end of the monsoon season. The recently announced Goods and Services Tax rate revisions will boost sales of auto and white goods, thereby supporting demand for sheet products.

This will support steel production and consequently demand for bulk raw materials. This, combined with low metallurgical coke and coal inventories at steel mills, indicates a potential acceleration of restocking, but this will occur from the end of October.

While the market condition has been broadly stable and will continue to stay steady in JKT, iron ore and metallurgical coal imports to Europe have seen steady growth over June–August. With seasonally stronger end-use demand and restocking efforts being expected, demand for steel and thus bulk raw materials will exhibit continuous growth despite a generally low-level base compared with last year.

Iron ore

Iron ore has been on a sustained upward trajectory, and a near-term correction seems unlikely.

Steel margins, the key indicator of iron ore consumption, remain positive, signaling ongoing demand support. Additionally, China’s Golden Week (Oct. 1-8) is approaching, which is a period when restocking typically picks up. With steel mill inventories being low, both mills and traders are expected to replenish stocks, likely keeping market momentum going until the second week of October.

On the supply side, major exporting regions have been delivering strong output, with miners pushing volumes aggressively as the quarter draws to a close. The heavy shipments departed over the past month are expected to arrive in China right after the Golden Week holiday, creating a short period of excess supply in the market. As participants return from the break, iron ore prices will hinge on steel mills’ decisions—whether to ramp up or slow down steel output.

Capesize freight is moving into its peak season, supported by strong iron ore flows and a rebound in bauxite shipments from Guinea following the rainy season. However, higher transport costs could limit some exports from southern Brazil, which may help partially balance the market.

Metallurgical coke and coal

Metallurgical coal and coke prices have more downside risk than upside in the month ahead.

Stronger demand for spot metallurgical coal cargoes from India will still be at least one month away, given high steel inventory and the upcoming festive season. Indian steelmaking margins are heading in the right direction, but we expect mills to continue their frugal purchasing approach and keep metallurgical coal inventory lean. Indian mills will need to boost purchasing from the end of October to support accelerating hot metal production.

Some idled coking coal supply will return to the market in Q4. Prices are likely to see a moderate softening over the coming weeks before the demand rebound emerges in India. Chinese metallurgical coal prices will see more resistance on the downside due to lower domestic supply in 2025 H2. This will result in a small premium for Chinese HCC being maintained over seaborne prices in the month ahead.

Metallurgical coke prices are also expected to soften with two price cuts already realized in the Chinese domestic market. India’s import quota will keep Indian seaborne coke demand constrained, forcing Indonesian coke producers to reduce capacity utilization and delay new capacity commissioning.