China’s 10-day steel output rebounded sequentially, but signals from demand and iron ore prices remain weak

Overview

This report is J.P. Morgan’s tracking of China’s steel output, iron ore FOB prices, and bulk commodity shipping costs. The core conclusion is that China’s 10-day crude steel output improved sequentially but remains weak, macro demand data also softened, iron ore FOB prices are below start-of-year levels and levels before the Middle East situation escalated, while freight rates have risen again due to Middle East tensions, potentially further compressing margins for some mining companies.

Core views

The report argues that the short-term sequential rebound in China’s steel output is insufficient to change the view of weaker conditions in the second half. Ten-day crude steel output was annualized at 996Mt, up 3% from the prior period and up 1% year over year, but on a 30-day moving basis it was still down 2% versus the prior 30 days and down 1% year over year. Combined with declining fixed asset investment and a downward GDP forecast revision, JPM judges that China’s steel output in 2026 may have already peaked near the annualized 1,033Mt level in May. On iron ore, Australia FOB prices are about $86/t, down 6% year to date, while Brazil FOB prices are about $66/t, down 14% year to date; meanwhile, freight rates from Australia to China rose 9% week over week, making longer-haul and freight-sensitive exposures such as Brazil and South Africa more vulnerable to pressure.

Analysis framework

The report uses high-frequency output tracking, seasonal range comparisons, macro demand validation, decomposition of FOB iron ore prices and freight rates, and company-level iron ore exposure mapping to link changes in Chinese steel demand to earnings risks for EMEA metals and mining equities.

Methodology notes

• Industry high-frequency tracking10-day annualized tracking of China crude steel output

  Use high-frequency output data such as CISA to observe turning points in China’s steel supply-demand cycle.

  The report compares 10-day crude steel output through July 10 with the prior 10 days, year-over-year changes, and 30-day rolling changes, and combines this with historical seasonal ranges to judge that output remains in a weak position.

• Commodity price analysisFreight-adjusted FOB iron ore prices

  Separate iron ore prices from shipping costs to observe miners’ realized pricing and margin pressure.

  The report focuses on changes in freight rates from Australia, Brazil, and South Africa to China, and notes that Australia and Brazil FOB iron ore prices are below start-of-year and late-February levels.

• Macro cross-validationValidation using fixed asset investment and GDP forecasts

  Use China macro demand indicators to validate the resilience of steel demand.

  JPM China economists noted that fixed asset investment fell 10.0% year over year in June and 5.7% year to date, and cut the full-year real GDP forecast from 4.7% to 4.6%.

• Equity mappingMapping iron ore exposure and transport cost sensitivity

  Assess potential margin pressure based on mining companies’ exposure to iron ore and long-haul shipping costs.

  The report believes Anglo American and Kumba Iron Ore face more pronounced margin pressure because of greater exposure to bulk transport costs for Brazilian and South African iron ore.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Rio Tinto plc (RIO.L)

  EMEA metals and mining equity with iron ore exposure

  Strengths

  A large diversified mining platform, rated Neutral in the report.

  Weaknesses

  Weaker iron ore FOB prices may affect realized pricing.

  Comparison

  Compared with Anglo American and Kumba, the report does not emphasize greater sensitivity to long-haul freight rates from Brazil and South Africa.

  Risks

  Further weakness in Chinese steel demand, additional declines in iron ore prices, and continued increases in freight rates.

• BHP Group Ltd London listing (BHPB.L)

  London-listed mining equity with iron ore exposure

  Strengths

  Maintained at Neutral in the report; the group’s asset quality and iron ore exposure still provide defensive characteristics.

  Weaknesses

  Iron ore realized prices in this week’s production report were about $1/t below JPMe expectations.

  Comparison

  BHP’s primary Australia listing is rated Overweight by colleague Lyndon Fagan, indicating differences in view across listing entities.

  Risks

  Iron ore realized prices below expectations, slowing Chinese demand, and higher freight rates.

• BHP.AX

  BHP equity asset listed primarily in Australia

  Strengths

  The report notes that colleague Lyndon Fagan rates BHP’s primary Australia listing Overweight.

  Weaknesses

  Iron ore price realization remains affected by changes in FOB prices and freight rates.

  Comparison

  Rated more positively than the Neutral rating on the London-listed BHP entity.

  Risks

  A decline in China steel output after peaking, falling ore prices, and cost inflation.

• Rio Tinto Ltd (RIO.AX)

  Australia-listed Rio Tinto equity asset

  Strengths

  The report notes an Overweight rating from colleague Lyndon Fagan.

  Weaknesses

  The iron ore business remains sensitive to Chinese demand and realized prices.

  Comparison

  Rated more positively than Rio Tinto plc’s Neutral rating.

  Risks

  Weak Chinese demand, falling iron ore prices, and rising transport costs.

• Anglo American (AAL.L/AGLJ.J)

  Mining equity with high sensitivity to iron ore and bulk commodity freight rates

  Strengths

  Diversified mining asset portfolio.

  Weaknesses

  The report believes it has higher exposure to bulk freight rates for Brazilian and South African iron ore and is therefore more vulnerable to margin pressure.

  Comparison

  Compared with Rio Tinto and BHP, Anglo American is placed on Negative Catalyst Watch, reflecting a more cautious view.

  Risks

  Disappointing Q2’26 production results, weak realized iron ore prices, soft H1 EBITDA in the diamond business, and group cost inflation.

• Kumba Iron Ore Limited (KIOJ.J)

  South African iron ore producer

  Strengths

  After the share price fell about 30% since February, the report upgraded it from Underweight to Neutral.

  Weaknesses

  Sensitive to South Africa-to-China iron ore freight rates and realized iron ore prices.

  Comparison

  Despite continued freight pressure, valuation and the share-price pullback improved the rating from Underweight to Neutral.

  Risks

  Further declines in iron ore FOB prices, rising freight rates, and margin pressure.

Key data

• 10-day China crude steel output996Mt annualizedOn the 10-day basis through July 10, 2026, up 3% versus the prior 10 days and up 1% year over year.
• 30-day trend in China steel outputDown 2% sequentially, down 1% year over yearRolling 30-day steel output remains weak relative to both the prior 30 days and the same period last year.
• Assessment of 2026 output peak1,033Mt annualizedThe report believes China’s steel output may have peaked on May 10, 2026.
• China fixed asset investmentDown 10.0% year over year in June, down 5.7% year to dateJPM views this as a signal of weak domestic demand.
• JPM China real GDP forecast4.6% in 2026Cut from the previous 4.7%, reflecting weak domestic demand and a more challenging external environment.
• Australia FOB iron ore priceAbout $86/tDown 6% year to date and down 1% versus late February.
• Brazil FOB iron ore priceAbout $66/tDown 14% year to date and down 9% versus late February.
• Freight rates from Australia to ChinaUp 9% week over week, about $1/t higherThe report attributes the increase to a rebound in bulk shipping rates caused by escalating Middle East tensions.
• China steel exports126Mtpa annualized in June 2026; 55Mt in 1H 2026The export run rate is at the high end of the historical average range, with first-half exports accounting for about 11% of total output.
• China port iron ore inventoriesAbout 160MtAt a historically high level, but down 7Mt from the March peak.

Impact & implications

For investors, the main implication of the report is that fundamentals across the steel and iron ore chain remain cautious: even if output rebounds sequentially in the short term, the demand side and inventory side have not yet shown a strong recovery, realized iron ore prices remain under pressure, and rising freight rates may erode miner profitability. At the stock level, Anglo American and Kumba Iron Ore, which have greater exposure to iron ore and long-haul freight rates, are more vulnerable to margin pressure; ratings on BHP and Rio Tinto diverge due to differences in listing entity, regional coverage, and valuation.

Risks

• China fixed asset investment continues to decline, dragging on steel demand.
• If China’s steel output has already peaked in 2026, output and raw material demand may continue to slow in the second half.
• Escalating Middle East tensions push up bulk commodity freight rates, squeezing FOB realizations and margins for iron ore suppliers.
• Australia and Brazil FOB iron ore prices are below start-of-year levels, reflecting weak momentum in ore prices.
• Chinese steel mill margins continue to face pressure from rising coking coal prices.
• High inventories may limit steel price gains and mills’ restocking elasticity.

What to watch

• Whether subsequent 10-day and 30-day China crude steel output continues to run below the seasonal range.
• Whether China fixed asset investment, the property chain, and infrastructure demand improve.
• Whether iron ore freight rates from Australia, Brazil, and South Africa to China continue to rise.
• Whether iron ore FOB prices can return to start-of-year levels and levels before the Middle East situation escalated.
• Realized iron ore prices in upcoming production reports from BHP, Rio Tinto, Anglo American, and Kumba.
• Anglo American’s Q2’26 production results, H1 EBITDA in the diamond business, and group cost inflation.
• Whether China’s annualized steel export run rate remains at historical highs.