The price of Australia's 62% Fe grade iron ore fines delivered to China dropped last Friday (May 8), ending a strong growth that pushed the commodity to its highest point in 22 months. Despite this daily drop to US$112.3 per ton, the market secured a fourth straight weekly increase.

Weakening demand in China drove the reversal. While local steel inventories are falling, high prices have slowed down buying from end-users. Besides, steel output may have reached its limit, reducing the need for raw materials. Trading in black futures also turned bearish, adding downward pressure.

Supply issues surfaced at the Simandou mine due to labor disputes, yet market participants believe the impact remains minor for now. With steel mills facing limited profit growth, it is expected that iron ore prices will fluctuate at these high levels rather than continue their rapid hike.