Iron ore futures have climbed back above the $100 per tonne mark this week, reaching their highest level since mid-July, as tightening metallurgical coal supply boosts steelmaking costs and pushes rebar and hot-rolled coil prices to multi-month highs.

Combined with China's August manufacturing PMI indicating a recovery in demand, declining inventory levels, and a second consecutive weekly increase in spot trading activity among steel traders, the market is seeing signs of a staged stabilization. However, the sustainability of this rebound remains a subject of debate among market participants.

Singapore iron ore futures broke through the $100 per tonne threshold this week, marking a fresh peak not seen since mid-July. The rally is being driven by tightening coking coal supplies, which have lifted rebar and hot-rolled coil prices to multi-month highs, thereby strengthening the overall cost support along the steel supply chain and benefiting iron ore prices.

Rafael Barcellos, Head of Latin America Metals & Mining and Pulp & Paper Equity Research at Bradesco BBI, stated in a research note last week that his team had previously anticipated a bottom in iron ore prices, and current market movements are validating that call. He expects the upward trend to extend, supported by firm cost fundamentals and improving downstream conditions. Meanwhile, London copper futures hit a record high of $14,530 per tonne on Monday, adding to the broadly bullish sentiment across the metals complex.

Where to begin

The immediate catalyst for this iron ore rebound stems from tightening supply in the metallurgical coal segment. Barcellos highlighted in his note that reduced coking coal availability is effectively underpinning steel prices, with both rebar and hot-rolled coil trading at multi-month highs. Stronger steel prices have, in turn, improved mill profitability and transmitted support upstream to iron ore. From a fundamentals perspective, iron ore inventories continue to decline, spot trading activity among Chinese steel traders has risen for a second straight week, and steel mill margins have shown some recovery-all indicators pointing to a marginal improvement in market sentiment. That said, blast furnace utilization rates have declined for a second consecutive week, adding a degree of uncertainty to the recovery narrative and suggesting that a full-scale demand recovery has yet to materialize.

Demand-side signals are also turning more constructive. Barcellos cited China's August manufacturing PMI as another encouraging economic indicator, arguing that it reinforces expectations of a seasonal pickup in downstream demand. Improving conditions in the steel downstream sector are providing additional support for iron ore prices. As the seasonal peak demand period approaches, close attention is being paid to whether demand can generate sustained momentum and help iron ore maintain its position above the triple-digit level.

Why only prices may face the test of sustainability

Barcellos has been unequivocally bullish on the iron ore bottoming opportunity in previous notes, asserting that the current price rally validates this thesis. Under the dual framework of cost support and downstream improvement, his overweight stance on related assets remains unchanged. The reclaiming of the $100 level has prompted the market to reconsider whether iron ore has completed its staged bottom-building process. Yet analysts generally caution that the price's ability to hold in the triple-digit range will ultimately depend on whether China's downstream demand evolves from a seasonal improvement into a structural trend.