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Chinese blast furnace (BF) utilization rates have stagnated and iron ore port stock volumes are rising, reaching their highest levels since March, which suggests that iron ore supply is becoming excessive while demand is not growing. Unsurprisingly, prices dropped last week and we expect the trend to continue. The market has turned more bearish, similar to what happened after the price spike in the second quarter last year when there was a sharp downward correction in the iron ore index. In contrast to last year, however, there is stronger underlying demand while crude steel output levels are higher. We, therefore, anticipate the price floor to be at a higher level than last year.Seaborne iron ore and coking coal prices continued to diverge for a second consecutive week, in line with our expectations. While iron ore prices have come under pressure from a slowdown in China's demand growth, in the met coal market support for prices comes from ex-China markets. Although there are concerns over China's demand for import metallurgical coal - also given increased tensions with Australia - activity is recovering post-pandemic in other key consuming markets and the revived demand will support prices.Chinese domestic heavy melt scrap prices have also slid amid declining finished steel prices and production levels. A combination of falling scrap prices and firming estimated hot metal production costs - driven by rising coking coal - reduced the premium that scrap holds over hot metal. Should iron ore prices continue to retreat as we expect, however, and should scrap imports be increasingly allowed into the country, this will put additional pressure on Chinese domestic scrap prices.Consequently, imports of iron metallics will become less price attractive for Chinese steelmakers, which is dragging demand down. The booming Chinese demand for merchant pig iron and hot-briquetted iron supported prices through most of the second and third quarters when the rest of the world was still struggling with the consequences of Covid-19. The situation has started to reverse now.Click here to view the Steel Raw Materials Market Tracker in full. If you are not a subscriber but would like see a free sample report, please click here.