China's 10-day crude steel output fell 1% sequentially, with iron ore price support coming more from freight rates and the cost curve

Overview

This report is JPMorgan's short-cycle channel checker update on China steel and global metals & mining. The core message is that China's crude steel output has edged down sequentially but is still slightly up year over year, and the past 30 days of data show output remains at the low end of the historical range; support for iron ore prices is coming mainly from higher freight rates and a higher industry cost curve rather than a clear improvement in end demand. Meanwhile, the Shanxi coking coal accident and inspections of energy-intensive industries may disrupt prices of related commodities such as coal and aluminium.

Core views

The report argues that China's steel output data do not indicate a strong demand recovery: 10-day output fell 1% sequentially, while the past 30 days were flat year over year and at the bottom of the 5-year range. In iron ore, CFR prices are about $105/t, but rising freight rates from Australia and Brazil to China have caused divergence in FOB terms; JPMorgan raised its 2026/2027 iron ore price forecasts and long-term real price assumption, with the rationale leaning toward a higher cost curve rather than demand-driven upside. On equities, EMEA mining companies trade at only a limited discount to fair value, and combined with cost inflation and macro uncertainty, the overall view remains cautious.

Analysis framework

The report combines tracking of China's 10-day and 30-day crude steel output, decomposition of CFR and FOB iron ore prices, changes in seaborne freight rates, coking coal supply disruptions, inspections of energy-intensive industries, and the fair value valuation framework for EMEA mining companies to assess short-term commodity price implications and related stock rating implications.

Methodology notes

• High-frequency industry trackingchannel checker

  Use 10-day and 30-day crude steel output to track marginal changes in China's steel supply and demand.

  The report annualizes China's average daily crude steel output as of May 20 and compares it with the previous 10-day period, the same period last year, and the past 30 days to judge output momentum and its position within the historical range.

• Commodity price decompositioncfr and fob price decomposition

  Separate landed iron ore prices from ocean freight to observe the true price change at the mine end.

  CFR prices are about $105/t, but after accounting for higher freight rates, Australia's FOB price is up about $2/t from pre-conflict levels while Brazil's FOB price is down about $5/t, indicating that the price change is not purely demand-driven.

• Equity valuationfair value comparison

  Use base-case fair value to assess discounts or premiums in EMEA mining stocks.

  The report notes that EMEA mining companies trade at less than a 10% discount to fair value, and incorporates 5% to 10% cost inflation and cautious macro assumptions, so the sector equity view remains cautious.

Asset mapping & comparison

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

• China steel

  Core tracking target

  Strengths

  10-day crude steel output was still up 1% year over year, and the past 30 days were up 3% versus the prior 30 days.

  Weaknesses

  10-day output fell 1% sequentially, while the past 30 days were flat year over year and at the bottom of the 5-year range.

  Comparison

  Short-cycle improvement is limited and does not indicate a strong recovery relative to the historical range.

  Risks

  Demand recovery weaker than expected, production restrictions, and macro deterioration.

• Iron ore

  Upstream raw material in the steel production chain

  Strengths

  CFR prices are about $105/t, and JPMorgan raised its 2026/2027 forecasts and long-term real price assumption.

  Weaknesses

  The price increase mainly reflects freight rates and the cost curve rather than demand-driven gains.

  Comparison

  Australia FOB prices rose slightly versus pre-conflict levels, while Brazil FOB prices actually fell, showing divergence across regions and freight impacts.

  Risks

  Falling freight rates, insufficient demand, changes in cost curve assumptions, and easing geopolitical conflict.

• Coking coal

  Key raw material for steel production

  Strengths

  The Shanxi accident led to about 122Mt of suspended capacity, and futures prices rose more than 10% after the accident.

  Weaknesses

  Price support depends on the duration of the shutdown; if capacity returns, gains may reverse.

  Comparison

  Compared with steel demand, coking coal is more driven by supply disruptions in the short term.

  Risks

  Shutdown duration shorter than expected, changes in inspection outcomes, and recovery in coal supply.

• Aluminium

  Energy-intensive metal category

  Strengths

  Production inspections may constrain supply in key energy-intensive industries in China, providing potential price support.

  Weaknesses

  The report does not provide specific quantified output or price data.

  Comparison

  Compared with steel, aluminium catalysts come more from energy-consumption inspections and supply constraints.

  Risks

  Inspection intensity below expectations, weaker demand, and changes in power and costs.

• EMEA mining equities

  Related equity assets

  Strengths

  Some companies still trade below base-case fair value, and Norsk Hydro is listed as the only OW in industrial metals due to its aluminium exposure.

  Weaknesses

  Overall, the discount to fair value is less than 10%, valuations are not cheap, and cost inflation is 5% to 10%.

  Comparison

  JPMorgan rates Anglo American and Kumba Iron Ore as UW, BHP, Rio Tinto, and Glencore as Neutral, and Norsk Hydro as OW.

  Risks

  Global macro uncertainty, cost inflation, commodity price volatility, and valuation pullback.

Key data

• 10-day China crude steel output1,026Mt annualisedAs of May 20, down 1% from the previous 10-day period and up 1% year over year.
• Steel output over the past 30 days+3% vs previous 30 days; flat YoYUp 3% versus the prior 30 days, flat year over year, and at the bottom of the 5-year range.
• Spot CFR iron ore price约$105/tThe price fell back to about $105/t, but the report emphasizes that the increase was driven more by marginal costs than by demand.
• Freight from Australia to China$15.65/tRose to the highest level since the Iran conflict.
• Freight from Brazil to China$36.25/tHigh freight rates affect the decomposition between CFR and FOB prices.
• Australia FOB price change+$2/t, +3%After deducting freight, up about $2/t versus pre-conflict levels.
• Brazil FOB price change-$5/t, -7%After deducting freight, down about $5/t versus pre-conflict levels.
• JPMorgan iron ore price forecast2026/2027: $105/$99/tThe latest global iron ore market analysis raised price forecasts by about $5/t.
• Long-term real iron ore price assumption$90/tRaised from the previous $80/t to $90/t.
• Suspended coking coal capacity约122Mt，约占中国总产能3%Following the Shanxi Liushenyu coal mine accident, JPM APAC Mining estimates related capacity has been suspended.
• China coking coal futures>10%Prices rose more than 10% after the accident.
• EMEA mining valuation<10% discount vs Fair ValueIn the base case, the discount to fair value is less than 10%, incorporating 5% to 10% cost inflation.

Impact & implications

For steel and iron ore, short-term output data do not support a strong demand recovery narrative, and price support is coming more from freight rates, supply disruptions, and the cost curve. For coking coal, the Shanxi accident-driven capacity suspension could push prices higher if the shutdown persists. For equities, limited valuation discounts in mining stocks, together with cost inflation and elevated macro uncertainty, imply that further upside requires stronger demand or price catalysts.

Risks

• China steel demand may fail to improve, keeping output and raw material demand at low levels.
• If iron ore price gains are driven mainly by freight rates and the cost curve, insufficient validation from demand may limit sustainability.
• If the Shanxi coking coal shutdown lasts for less time than expected, coal price gains may retreat.
• There is uncertainty over the actual supply impact of inspections on aluminium and other energy-intensive sectors.
• EMEA mining companies have limited valuation discounts; if the macro environment weakens or costs continue to rise, upside in equities may be pressured.
• Parts of the report are industry updates and disclosure information, and do not provide complete company target prices or details of a unified valuation model.

What to watch

• Subsequent 10-day and 30-day sequential and year-over-year changes in China's average daily crude steel output.
• Whether crude steel output remains at the bottom of the 5-year range or begins a sustained recovery.
• Changes in CFR iron ore prices and freight rates from Australia to China and Brazil to China.
• Trends in Australia and Brazil FOB iron ore prices after deducting freight.
• The scope of coking coal capacity suspensions in Shanxi and the pace of resumptions.
• Whether China coking coal futures continue the post-accident gains.
• The actual constraints on aluminium supply from production inspections in China's key energy-intensive industries.
• Changes in cost inflation, macro assumptions, and relative discounts to fair value for EMEA mining companies.