I. Overall Market Trend Overview
During 28 July – 4 August 2026, the ferrous futures complex generally exhibited a persistent downward trend, probing for a bottom. On the morning of 4 August, individual contracts traded mixed – ferrosilicon rose over 2%, while manganese silicon, coking coal and coke edged higher, but rebar, iron ore and HRC continued to fall. In the night session, most ferrous commodities closed lower, with rebar and HRC hitting fresh intraday lows of 2,972 and 3,187 respectively.
Looking at the whole of July, the ferrous index recorded a monthly gain of about 5.03%, but the trend reversed from late July to early August, with correction pressure intensifying significantly.
II. Market Drivers
(A) Demand Side: Obvious Off Season Characteristics, Three Major Cycles Align Downward
The core weakness in ferrous markets is the simultaneous downward trend of three critical cycles: demand cycle, steel mill profit cycle, and inventory/supply cycle.
Manufacturing PMI declined: China’s July Caixin/S&P Manufacturing PMI came in at 50.9, down 0.8 points from June.
Property sector remained depressed: In July, the average second-hand residential property price in 100 cities fell 0.44% m-o-m and 7.37% y-o-y; 92 cities saw m-o-m declines.
High auto inventories: July auto dealer inventory warning index stood at 61.1%, up 3.9 percentage points y-o-y.
Rising steel social inventories: In late July, social stocks of the five major steel products reached 9.80 million tonnes, up 180,000 tonnes m-o-m and 24.8% y-o-y.
(B) Supply Side: High Shipments, Insufficient Production Cuts
Although mills have started maintenance related production cuts (hot metal output down to 2.3555 million t/day), the pace of supply contraction lags behind demand deterioration. Global iron ore supply is projected to grow by about 2.5% in 2026, with new low-cost capacity (e.g., Simandou in Guinea) gradually entering the market.
(C) Event Shock: Trade Credit Risk Event Accelerated the Decline
Around 3 August, the market learned of the Radiant World trade credit incident – major commodity trading houses Vitol and Cargill stopped trading with it, and Glencore suspended new business. This affected spot trade credit, financing and liquidity, prompting some participants to liquidate spot or futures positions to reduce risk, which temporarily magnified iron ore’s decline. However, analysts noted that this was only a liquidity shock that accelerated the fall, not the root cause.
III. Summary
During 28 July – 4 August, ferrous futures experienced a reversal from gains to losses, accelerating the bottom-searching process. The core drivers were:
Off-season demand coupled with weak macro data led to persistent contraction in end use demand;
High supply shipments and a sharp jump in iron ore arrivals;
Strengthened negative feedback loop: steel prices fall → profits shrink → production cuts → less demand for raw materials → raw material prices follow suit;
Trade credit event amplified the drop on both sentiment and liquidity fronts.
In the short term, the weak market structure is unlikely to change. Most institutions agree that, without policy signals to curb supply, ferrous markets will remain in a demand-driven downtrend and bottoming phase. Attention should be paid to potential demand changes around mid August and any possible policy stimulus signals.
