Market Overview - The mainstream spot prices for iron ore are reported as follows: PB powder at 765 CNY/ton and Brazilian mixed powder at 776 CNY/ton [1] - The main iron ore futures contract increased by 1.06% (+7.5) to close at 714.5 CNY/ton [1] Basis and Costs - The optimal delivery product is Brazilian mixed powder, with warehouse costs for PB powder and Brazilian mixed powder at 810 CNY and 795 CNY respectively. The basis for the 09 contract PB powder is 96 CNY/ton [2] Demand Metrics - Daily average pig iron production is 2.4564 million tons, with a slight increase of 0.22 million tons; the blast furnace operating rate is 84.62%, up by 0.29%; the capacity utilization rate for blast furnace ironmaking is 92.09%, an increase of 0.08 percentage points; and the steel mill profit margin is 58.87%, up by 2.59 percentage points [3] Supply Dynamics - Global shipments have slightly rebounded this week, with a decrease of 21.5 million tons to 30.29 million tons. Shipments from Australia and Brazil totaled 24.225 million tons, down by 1.18 million tons. Australian shipments were 17.972 million tons, up by 0.28 million tons, with 15.938 million tons sent to China, an increase of 0.755 million tons. Brazilian shipments were 6.252 million tons, down by 1.46 million tons. The arrival volume at 45 ports was 23.546 million tons, down by 0.951 million tons [4] Inventory Levels - As of May 8, the inventory at 45 ports stands at 142.387 million tons, a decrease of 0.6377 million tons; steel mills have slightly resumed production, and the profit margin for steel mills has improved. The imported ore inventory at steel mills decreased by 3.7607 million tons to 89.5898 million tons, as inventory was consumed during the holiday period [5] Market Sentiment and Outlook - The iron ore 09 contract experienced a spike and subsequent pullback, with night trading accelerating upward. The average daily pig iron production has slightly increased week-on-week, maintaining a high level. SMM reports an increase in maintenance at steel mills, with a rise in maintenance for construction materials and hot-rolled coils, suggesting a potential peak in pig iron production. Inventory levels have decreased to a yearly low, with port inventories slightly declining. The outlook for the market indicates that terminal demand for finished steel will determine the sustainability of high pig iron production levels, with marginal changes influenced by exports and infrastructure projects. Current data shows unexpected high exports of steel billets, and SMM's high-frequency steel export data has surged. However, the supply-demand pressure for iron ore is expected to increase in the coming months due to a surge in overseas mine shipments, while macroeconomic sentiment may provide short-term support. The short-term valuation of iron ore is expected to recover, but a bearish outlook is maintained for the medium to long term [6]

Investment Rating - The report indicates a strong performance in iron ore prices, suggesting a positive investment outlook for the sector [1]. Core Insights - Iron ore spot prices closed at 835 CNY/ton, a 4% increase month-on-month, while the DCE iron ore index closed at 831 CNY/ton, up 3.5% [9]. - Daily average trading volume for iron ore options was 347,985 contracts, showing a month-on-month increase, while total open interest was 360,031 contracts, reflecting a decrease [10]. - The report highlights a slight decline in iron water production, but a significant recovery in profit per ton of steel [18]. Summary by Sections 1.1 Market Review - Iron ore spot prices increased by 4% month-on-month, with the DCE iron ore index rising by 3.5% [9]. 1.2 Options Market Review - Daily average trading volume for I2505 series options rose to 102,964 contracts, with total open interest increasing to 315,120 contracts [13]. - The implied volatility for the main contract series options remained stable at 28% [14]. - The short-term historical volatility for iron ore was recorded at 24%, which is below the average level [16]. 1.3 Options Strategy Recommendation - The report recommends a strategy of buying put spreads, as the iron ore price is expected to maintain a strong performance despite slight declines in production and inventory levels [18].