COMMODITIES REVIEW: geopolitical pressures

China-linked commodity markets sent a split signal over the past week: domestic industrial demand remained subdued, while geopolitical and supply pressures pushed several globally traded raw materials sharply higher. Iron ore, the commodity most directly tied to Chinese construction and steelmaking, was virtually unchanged week on week despite a sizeable midweek fall. By contrast, oil surged as renewed US-Iran fighting threatened Middle Eastern supply, while zinc reached a four-year high as shortages outside China highlighted the growing importance of Chinese smelters to global metal availability.

The most-traded iron ore contract on the Dalian Commodity Exchange closed September 2 at 714 RMB (US$105) per tonne, compared with 716.5 RMB (US$106) on August 27, a decline of 2.5 RMB, or 0.35%. Prices fell 1.7% on Wednesday alone as rising ore supply and higher coking-coal costs squeezed steelmaker margins, although stronger mill restocking at lower prices prevented a deeper decline. Blast-furnace utilization and hot-metal production both increased during the week, offering some support. The broader picture remains less encouraging: China’s property downturn continues to restrict construction-led steel demand, while elevated imports and inventories mean the world’s largest iron ore buyer has little reason to chase prices higher.

Zinc moved in the opposite direction. LME three-month zinc reached US$3,990 per tonne on September 2, against US$3,890 on August 27, an increase of US$100, or 2.6%. Global mined output unexpectedly fell 2.6% in the first half of 2026, leaving Western smelters short of concentrate and pushing treatment charges sharply lower. Chinese smelters, however, have increased refined output and secured greater concentrate imports. That divergence matters internationally: tighter Western supply increases the market’s dependence on Chinese refining capacity even as Beijing seeks greater influence across strategic commodity supply chains.

Oil delivered the week’s largest macroeconomic move. ICE Brent settled at US$95.63 a barrel on September 2, up from US$89.70 on August 27, a gain of US$5.93, or 6.6%, after renewed US-Iran strikes revived fears of disruption around the Strait of Hormuz. China’s weak oil demand is limiting the upside—July crude imports were down 24.3% year on year—but discounted Iraqi supplies are attracting Chinese refiners. The key question for commodity markets is therefore whether geopolitical supply constraints continue to overwhelm China’s softer underlying demand.