Core Viewpoint - The iron ore market is experiencing a rare "reverse game" as prices remain high while inventory levels reach record highs, creating a complex dynamic between supply and demand [1][2][3]. Price and Inventory Dynamics - As of February 5, 2026, the price of 62% Australian iron ore is at $102.70 per ton, showing no significant decline despite high inventory levels [1]. - National inventory at 45 major ports reached 170.22 million tons, with a week-on-week increase of 2.56 million tons, marking a near two-year high [2]. - Trade merchants are reluctant to sell despite high inventory, while steel mills are cautious in their purchasing, leading to a challenging balance in the market [3][4]. Supply and Demand Factors - The accumulation of inventory is attributed to stable supply from major global mines and seasonal demand slowdown as steel mills prepare for maintenance ahead of the Spring Festival [5][6]. - The average daily unloading volume at 45 ports decreased significantly to 2.69 million tons, indicating a slowdown in demand from steel mills [4]. Market Behavior and Strategies - Port operators are adopting cautious and refined strategies to manage high inventory levels, focusing on optimizing storage and improving turnover efficiency [7][9]. - The price pressure from high inventory is not linear, with a complex interplay between buyers' strong bargaining power and sellers' reluctance to sell at lower prices [10][15]. Procurement Strategies of Steel Mills - Steel mills are emphasizing risk management in their procurement processes, utilizing long-term contracts and futures to stabilize costs [12][13]. - The trend towards refined procurement practices is becoming common, with mills favoring lower-cost materials and being cautious with high-priced mainstream ores [14]. Emerging Risks and Market Outlook - The iron ore market faces long-term risks of supply-demand imbalance, with expectations of increased global supply in the latter half of 2026 [16]. - Steel mills are sensitive to profit margins and may reduce production if material sales are sluggish, impacting iron ore demand [17]. - The market is evolving towards a more strategic approach, with participants focusing on risk management and financial tools to navigate price volatility [19][20].

Core Viewpoint - The iron ore market is experiencing an unusual "reverse game" characterized by high prices and record inventories, leading to a complex interplay between supply and demand dynamics [2][3][5]. Inventory Situation - As of February 5, 2026, iron ore inventories at 45 major ports in China reached 170.22 million tons, with 47 ports totaling 177.58 million tons, both surpassing the 170 million ton mark and hitting a two-year high [3][4]. - The inventory increase is attributed to stable supply from major global mines and a seasonal slowdown in demand as steel mills prepare for the upcoming Spring Festival [8]. Price Dynamics - The price of 62% Australian iron ore remained high at $102.70 per ton as of February 5, 2026, despite the high inventory levels [2]. - The market is characterized by a standoff where buyers are reluctant to purchase at high prices due to the inventory situation, while sellers, particularly those with higher-cost inventory, are hesitant to sell at lower prices [12][24]. Steel Mills' Strategies - Steel mills are facing pressure to manage procurement carefully, balancing the risk of inventory devaluation against the need to ensure raw material availability during production [14][15]. - The procurement strategies have shifted towards risk management, utilizing long-term contracts and futures to stabilize costs and mitigate price volatility [16][18]. Market Outlook - The iron ore market is expected to experience a phase of supply surplus, particularly in the second half of 2026, as new capacities come online, which may limit price increases [20]. - The interplay between steel mill production rates and inventory replenishment will significantly influence short-term price movements, with expectations of price fluctuations rather than a clear upward trend [25].