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Heightened cost sensitivity stemming from softer downstream demand is reshaping China’s yuan- and dollar-based trading, as well as preferences across imported iron ore grades, sources told Fastmarkets, adding that persistent supply uncertainty is also emerging as a defining force that is shaping iron ore trade flows globally in 2026.
There are expectations that China is set for a more active and cost-sensitive portside market heading into 2026, as mills increasingly prioritize cost efficiency and as policy expectations begin to reshape trading behavior, sources told Fastmarkets.
In 2025, lower yuan-priced mainstream iron ore fines at China’s portside market attracted stronger buying interest from domestic steel mills, many of which operated under negative steelmaking margins this year. This shift in demand gradually weighed on the seaborne equivalent premium and reduced reselling activities.
A Tianjin-based mill said its iron ore procurement is about evenly split between the seaborne market and the portside market this year, largely stable from the purchasing structure seen in 2024.
The trend temporarily reversed after some Newmans fines, Mining Area C fines in the seaborne market began trading at steep discounts starting in October. Improved arbitrage margins for reselling these cargoes into China’s yuan-denominated portside market stimulated speculative buying and supported seaborne prices in recent weeks.
However, a Hebei-based mill source anticipates a short-term uptick in portside trading activity and a corresponding dip in seaborne transactions, driven by market chatter that China’s ports may cut the free-storage period to 30 days starting from January 2026.
“Restocking demand ahead of the Chinese New Year holiday [over February 16-23] may further boost portside market activity,” the Hebei-based mill source said. “Most traders are also likely to accelerate destocking to avoid higher storage fees.”
However, a few traders said they might turn to focus on seaborne iron ore trading with a “dollar-buy” and “dollar-sell” as priority into 2026, given that the increased storage cost would shorten time for reselling at ports, as well as increasing ambiguity and volatility in the portside markets.
Several sources told Fastmarkets that Chinese mills are expected to continue favoring cost-effective products, be it from the seaborne or portside market, as the price gap between yuan-based portside iron ore and equivalent seaborne cargoes persists into 2026.
The unresolved pricing negotiations between Chinese buyers and oversea suppliers, and uncertainty in new supply volumes from Africa is expected by market participants to shape sentiment in 2026, sources said.
Slow-moving annual talks between a key Chinese buyer and major Australian miners have created ambiguity around term pricing, supporting short-term price resilience, sources told Fastmarkets.
“Market participants are worried about how the talks are progressing – weather conditions could worsen and disrupt stable raw material supply or inflate long-term costs,” a Singapore-based trader said.
Some long-term contracts have already been affected, with certain mills turning to alternative channels, including bilateral trades via traders, to secure specific products, a Shanghai-based trader said, adding that these privately tendered cargoes were originally intended for term customers, and the rise in tenders reflects a shift in sales channels rather than increased shipments.
Market participants also reported multiple quality downgrades from mainstream Australian and Brazilian ores in 2025, raising concerns over future high-grade availability.
In response to the changing market, Fastmarkets launched two new indices: the 61% Fe fines index on June 2 and the 62% lump premium on October 21. The price spread between the 61% and 62% Fe fines indices held around $2.09-2.14 per tonne in November.
Meanwhile, several miners trimmed their 2026 shipment expectations. Vale cut its 2026 output forecast in guidance released on December 2, despite the volume remaining higher than the 2025 level.
Rio Tinto, which is a key stakeholder in one Simandou block, followed on December 4 with a 2026 Simandou sales projection target of 5-10 million tonnes, shortly after Simandou sent its first shipment of iron ore to China. The figure came in well below market expectations, with one US-based analyst saying their earlier estimate was 19 million tonnes, flagging slower-than-expected volumes from the new mine.
Despite a reduction in traded volumes of low-to-mid grade sinter fines in the seaborne market, high-grade iron ore has been making inroads into the CFR China market amid a rerouting of global supply chains, a Singapore-based trader source told Fastmarkets
Suppressed steelmaking margins across steelmaking blocs globally has weighed on the procurement ability of mills over 2025, which has translated into softer demand for direct charge (DR) pellets and other low-emission raw materials, the Singapore-based trader said.
Fastmarkets’ latest assessment of the iron ore DR-grade pellet premium, quarterly contract was $38 per tonne on October 1, stable quarter on quarter, but marking the lowest level in four years.
The DR pellet premiums are based on Fastmarkets’ iron ore 65% Fe Brazil-origin fines, cfr Qingdao index.
Brazilian miner Vale reported pellet sales at 23.7 million tonnes in the first nine months of 2025, down by 4.49 million tonnes or 16% from 28.23 million tonnes in the same period a year earlier.
“The reduction of global pellet production has inadvertently resulted in a surge in pellet feed supply in the market, most of which has been diverted towards the Chinese market,” a trader in Shanghai said. “China remains the largest clearing market for global pellet supply due to its large pelletizing capacity.”
A second Singapore-based trader said that the surge in trading volumes of the 65% Fe derivatives in 2H 2025 reflects the uptick in hedging interest on high-grade material traded in the seaborne market, in particular high-grade pellet feed from a wider number of supply routes.
The Singapore Exchange’s 65% Fe iron ore contract registered a record high trading volume of 18,895 lots on August 13, following a record-breaking July with over 90,000 lots traded.
“Weaker steelmaking margins and poor consumption of DR-pellets is expected to extend into the first half of 2026, which could see continued trade flow of pellet feed sales into the CFR China market,” a trader in Beijing said.
Looking ahead to 2026, there are expectations among market participants that steelmaking margins will remain key in shaping iron ore trading patterns, influencing preferences for different ore grades and restocking behaviors, sources said.
In 2025, China’s steel mill margins peaked in July, with rebar net margins reaching 128.6 yuan per tonne and hot-rolled coil (HRC) at 301.21 yuan per tonne.
The demand for high-grade fines rose following the increase in profits among steel mills, widening the price spread between iron ore 65% Fe Brazil-origin fines and iron ore 62% Fe fines to an average of $18.01 per tonne in August, up from $14.99 per tonne in July and $11.02 per tonne in June. However, with rebar net margin returns in negative territory since September, the price spread narrowed to around $12 per tonne.
“Downstream demand weakness is expected to persist due to sluggish property sector. While robust steel exports provided some support this year, its resilience is viewed cautiously for next year amid rising trade barriers,” a Shanghai-based trader said.
A Zhejiang-based trader also told Fastmarkets that recent policy directives from China’s Central Political Bureau Meeting emphasize infrastructure and advanced manufacturing, offering limited stimulus for real estate, which would mean that the traditional driver for steel demand may only offer limited support next year.
As such, there are expectations among market participants that Chinese mills would continue to adopt a procurement strategy that prioritizes cost savings over productivity, source said, adding that “Hot metal production and iron ore demand are expected to be stable, nonetheless, steel producers will likely maintain a more cautious, inventory-light model throughout the year,” a second Singapore-based trader said.
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