I. Bottom Line & Directional Bias
Iron Ore (DCE.I2701) maintains a bearish bias. The core rationale is threefold: First, the price structure has broken down, with the [10-13 settlement] at CNY 679.5/t effectively breaching the lower band of the 20-day channel at CNY 678.5, and the night session [10-13 21:05~23:00] probing a low of CNY 671.5, confirming a short-term trend reversal to the downside; Second, fund flows show active short position building, with the main contract's notional open interest rising to CNY 42.68bn, up CNY 364m on the day, corresponding to an open interest build of 5,380 lots, indicating institutional capital continues to add short positions into the decline; Third, supply-demand fundamentals are under pressure, with port inventories at a five-year seasonal high and steel mill margins compressed, suppressing restocking appetite, compounded by uncertainty ahead of imminent macro data releases, reducing market risk appetite.
The invalidation conditions are clear: if the daily close reclaims CNY 684.17 (pivot point P) or the night session recaptures the CNY 680 integer level on volume, the short-term bearish thesis is falsified, shifting to a neutral, watchful stance. Currently, one must guard against the possibility that China's CPI and PPI data on October 14 exceed expectations, which could trigger macro sentiment disruption, but based on existing data, short-term downward pressure remains dominant.
II. Price Action & Technicals
Iron Ore futures (DCE.I2701) show a technically fatigued pattern. The [10-13 settlement] was reported at CNY 679.5/t, down 1.1% from the previous day, with a cumulative 5-day decline of 3.15% and a 20-day cumulative decline of 7.83%. The price has broken below the 20-day channel lower band at CNY 678.5, and the night session [10-13 21:05~23:00] probed a low of CNY 671.5, closing at CNY 675, down 0.3% from the day session close and down 0.66% from the settlement price, indicating continued bearish momentum.
Regarding technical indicators, ATR14 is CNY 10.46 (1.55%), RV20 is 15.7%, with volatility at a relatively high level. Pivot points show P at CNY 684.17, R1 at CNY 687.33, and S1 at CNY 679.83; the current price is near S1, and a break below CNY 679.83 could lead to a further probe of the S2 zone. The 20-day channel range is CNY 674–745, with the current price near the lower band; the 4.2% position indicates it is approaching a support level.
On the weekly chart, the last completed weekly candle (2026-10-08～2026-10-09) closed at CNY 682.5, with a weekly decline of 2.85%. The current week (starting 2026-10-12) has not yet closed, tentatively reported at CNY 677, down 0.81%, but the weekly pattern cannot be judged on this basis. The overall technical picture presents a bearish alignment; if the short-term support at CNY 674 is lost, it may accelerate the decline.
III. Supply-Demand Balance & Fundamental Drivers
Supply-demand fundamentals continue to pressure iron ore prices. Port inventories are at a five-year seasonal high, and compressed steel mill margins are suppressing restocking willingness, leading to weak demand. As an upstream raw material in the black industry chain, iron ore prices are directly affected by downstream demand for steel products like Rebar and Hot-rolled coil. Currently, steel mill profit margins are narrowing, and mills are cautious about iron ore procurement, mostly buying on a just-in-time basis, lacking the momentum for large-scale restocking.
In terms of macro transmission, China's CPI and PPI data are about to be released; if inflation data exceeds expectations, it may trigger changes in policy expectations, thereby affecting the overall sentiment of the black complex. However, in the short term, supply-demand imbalance remains the dominant factor. The iron ore supply side is relatively stable, while demand growth is sluggish due to the slowdown in real estate and infrastructure investment. Additionally, imported iron ore arrivals remain high, further exacerbating supply pressure.
Regarding the basis, the current spot basis is at a historical low, reflecting that futures prices have already discounted relative to spot, but the discount magnitude has not expanded significantly, indicating the market remains cautious about future price expectations. Overall, the supply-demand fundamentals are bearish, with significant downward price pressure.
IV. Positioning & Fund Flows
Positioning structure indicates shorts dominate the market. Top 20 seat data shows a net short position of 47,649 lots, down 8,991 lots on the day, but still maintaining a net short status overall. The main contract's notional open interest increased to CNY 42.68bn, up CNY 364m on the day, corresponding to an open interest build of 5,380 lots, indicating that during the price decline, shorts actively added positions while long covering was limited.
In terms of fund flows, the main contract fell on an open interest build, indicating institutional capital is inclined toward short positioning. The comparison between implied and realized volatility shows ^VIX at 15.27, with a 1-year percentile of 16%, suggesting market panic sentiment is relatively mild, but iron ore's own volatility remains high. The divergence between position changes and price action is limited; short position building is synchronized with price declines, reinforcing the downward trend.
It should be noted that the current positioning structure shows strong short power, but the reduction in net short positions may imply some shorts are beginning to take profit. If open interest continues to increase alongside falling prices, the short trend will be further strengthened.
V. Cross-Asset Relative Value & Global vs China
Cross-asset relative value shows iron ore underperforming other commodities. Iron ore vs FEF=F premium is +7.3% [2026-10-13], compared to +6.16% five days prior; the premium has widened after China tax-adjusted conversion, reflecting that Chinese iron ore is relatively expensive compared to international market prices, with the import window tending to open.
Regarding other relative values, the Gold/Silver ratio is 70.18, with a 1-year percentile of 82.54% and a 3-year percentile of 27.51%, indicating gold is relatively strong versus silver; the Copper/Gold ratio is 1.61, with a 1-year percentile of 99.6% and a 3-year percentile of 61.51%, indicating copper is significantly strong versus gold; the Oil/Gold ratio is 0.0225, with a 1-year percentile of 95.24% and a 3-year percentile of 50.53%, indicating crude oil is relatively expensive versus gold.
The international vs China market comparison shows a China iron ore premium of +7.3%, higher than the +6.16% five days prior, indicating Chinese iron ore prices have strengthened further relative to the international market, though this premium may be influenced by import costs, tariffs, and other factors. Overall, cross-asset relative value does not show a significant relative advantage for iron ore, and the widening premium between international and Chinese markets may reflect an intensification of China's supply-demand contradictions.
VI. Supply Chain & Seasonal Inventory (Historical ...)
Based on a historical statistical sample of 20 trading days starting from the same date over the past 13 years, iron ore futures performance in the mid-October time window exhibits a clear seasonal weakness characteristic. Statistical data shows an average return of -0.2% for this period, with a median decline of -2.43%; only 6 out of the 13 sample years recorded gains, a win rate of less than 50%, indicating that the beginning of the fourth quarter is typically a resonance period for weakening demand expectations and the release of supply pressure.
From the perspective of extreme value distribution, the best historical year was 2016, with a gain of +40.14% during the same period, primarily driven by the dual forces of supply-side reform expectations and infrastructure support policies; the worst year was 2021, with a decline of -22.49% during the same period, caused by the combination of global shipping bottlenecks and China's production restriction policies. Currently, October 14, 2026 falls within the 13th year sample interval of this statistical cycle, with both the historical mean and median pointing to downside risks outweighing upside opportunities. Although seasonal statistics have the limitation of a limited sample size, combined with the current fundamental status of high port inventories and compressed steel mill margins, historical seasonal patterns provide statistical support for the current bearish judgment. Note that seasonality only reflects a probability advantage; specific trends still need to be dynamically adjusted based on current macro data and marginal changes in supply and demand.
VII. Scenario Analysis
Base Case: Bearish Continuation (Probability 60%)
Core Logic: The price structure has broken, and the trend of short position building remains unchanged. If the daily close effectively breaks below CNY 679.83 (S1 pivot), it will confirm the establishment of a short-term downtrend. The trigger condition is a daily close below CNY 679.83, or a night session break below CNY 674 (20-day channel lower band) on volume. The target price is CNY 662.6 (corresponding to a risk/reward ratio of 1:1.5); if CNY 674 is further lost, it may accelerate the probe for lows. Operational Strategy: Establish short positions near CNY 679.83, with a stop-loss at CNY 691.35 and a target of CNY 662.6, for a duration of 1-5 days; or enter directly at the current price of CNY 677, with a stop-loss at CNY 688.52 and a target of CNY 659.7, for a duration of 1-2 weeks.
Bullish Scenario: Oversold Rebound (Probability 20%)
Core Logic: Better-than-expected macro data or a concentrated short stop-loss triggering a short squeeze. The trigger condition is a daily close reclaiming CNY 684.17 (pivot point P), or a night session recapture of the CNY 680 integer level on volume. If this signal appears, the short-term bearish logic is falsified, and prices may quickly repair to CNY 687.33 (R1 resistance) or even the CNY 700 integer level. Operational Strategy: If the above conditions are triggered, suspend short positions and wait; after the price stabilizes above CNY 684.17, a light long position can be tested, with a stop-loss below CNY 680 and a target of CNY 687.33.
Bearish Scenario: Accelerated Decline (Probability 20%)
Core Logic: Further deterioration in supply-demand contradictions or bearish macro data. The trigger condition is a daily close breaking below CNY 674 with continued open interest growth, or a night session break below CNY 671.5 (the 10-13 night session low) on volume. If this occurs, prices may quickly probe CNY 659.7 or even lower. Operational Strategy: Add to short positions when CNY 674 is lost, with a stop-loss at CNY 688.52 and a target of CNY 659.7, for a duration of 1-2 weeks. Close attention must be paid to China's CPI and PPI data on October 14; if the data is unexpectedly weak, it may reinforce the probability of this scenario.
The total probability of the three scenarios is 100%, with the base case having the highest probability, reflecting that the current market's dominant force remains the shorts. The invalidation condition is clear: a daily close reclaiming CNY 684.17 or a night session recapture of the CNY 680 integer level on volume shifts the stance to neutral observation.
VIII. Trading Strategies & Risk Management
Based on the established strategy, two short-selling plans are currently being executed. Plan one: short entry at CNY 679.83, stop-loss at CNY 691.35, target at CNY 662.6, horizon 1–5 days, risk/reward ratio 1:1.5. Plan two: short entry at CNY 677, stop-loss at CNY 688.52, target at CNY 659.7, horizon 1–2 weeks, risk/reward ratio 1:1.5. Both plans have a stop-loss distance of CNY 11.52, equal to 1.1x ATR (ATR14 is CNY 10.464), contract multiplier 100, risk per lot CNY 1,262 (including fees and slippage). A single-trade risk budget of CNY 66,928 corresponds to a reference cap of 53 lots.
Stop-loss placement logic: the plan-one stop at CNY 691.35 sits about CNY 7.18 above the pivot point P at CNY 684.17, covering short-term volatility noise; the plan-two stop at CNY 688.52 sits near the prior high of CNY 688.5, guarding against false breakouts. Position sizing strictly follows the risk conversion result: single-trade risk does not exceed 2% of total capital, and total position does not exceed 53 lots. Add/reduce rules: if the price moves 1x ATR (CNY 10.46) toward the target, cut 50% of the position to lock in profit; if the price moves against the position and hits the stop-loss, close immediately and do not hold a losing trade. If no entry condition is triggered, stay on the sidelines and wait for the price to return to the CNY 679.83 or CNY 677 zone.
IX. This Week's Data Calendar
Beijing time October 14 at 09:30, China CPI y/y expected 1.0% vs prior 0.8%, PPI y/y expected 4.4% vs prior 3.8%; at 10:03 trade balance expected 790B vs prior 809B; at 10:04 USD-denominated trade balance expected 116.8B vs prior 119.1B; at 16:03 M2 money supply y/y expected 7.4% vs prior 7.5%, new loans expected 1025B vs prior 60B. October 15 at 20:30, US core PPI m/m expected 0.3% vs prior 0.2%, core retail sales m/m expected 0.6% vs prior 1.4%, PPI m/m expected 0.6% vs prior 0.4%, retail sales m/m expected 0.3% vs prior 1.2%. October 16 at 11:30, Fed Chair speech. The data above will significantly affect black-series sentiment and warrants close attention.
This report is generated automatically from public quantitative and macro data for research and market tracking only. It does not constitute any investment advice.