The Three Mining Area In Vale Stopped Production Rumors. The Iron Ore Futures Surged Through 800 Yuan / Ton.

At the end of May, there were news in the industry that three mines of the Brazil iron ore giant Valley in the ETA Bela mining area will be closed due to the new crown pneumonia epidemic. At that time, Vale denied the rumors and said "all business activities remain unchanged".

However, last weekend's news of the closure of vale was confirmed. In June 6th, according to the decision of the local court, the operation of the itapila comprehensive mining area was suspended. The expected monthly output of the mine in the next few months is 2 million 700 thousand tons, with an annual output of about 0.324 billion tons, accounting for 10% of the total annual capacity of the vale.

In June 8th, the domestic iron ore main contract rose by more than 6%, of which the June, July and August contracts near deliveries exceeded 800 yuan / ton. So far, the Wenhua iron ore index has increased by nearly 30% compared with the beginning of May.

Changes in the fundamentals of the industry also rapidly spread to the capital market. June 8th, Jinling mining (000655.SZ) and Shougang shares (000959.SZ) limit.

Brazil mine is pushing up again

After being pulled again in June 8th, the settlement price of the current iron ore main 2009 contract has climbed to 766 yuan / ton, and at the end of April, the price is still 604 yuan / ton.

Last year, the Brazil mine accident once pushed up the price of the mine, and the driving force of the current round is still from Brazil.

Although the Vale has repeatedly stressed that the output target of 3.1 million tons to 3.3 million tons remains unchanged throughout the year, the shipments of Brazil iron ore have not been significantly improved in the first half of this year. In the first quarter of this year, Brazil iron ore shipments were only 59 million 610 thousand tons, down 18% from the same period last year.

In contrast, the domestic industry has rapidly got rid of the impact of the epidemic. Under the resumption of production, the demand side was released in April and May, and the utilization rate of steel enterprises was high.

This has led to a rapid decline in Port ore inventories. According to the business data, as of May 29th, there were 107 million 848 thousand and 500 tons of import ports in the 45 main ports in the country, and 1 million 412 thousand and 300 tons in the weekly ring ratio, falling 6 weeks in a row, reaching a new low of 3 years, down 13.01% from the same period last year.

Therefore, domestic iron ore supply and demand stage mismatch, supply side rapidly reduced, and demand side remained high.

On the other hand, the number of imported iron ore decreased further in May this year, which was 9% lower than that in April, which further brought basic support to ore.

He Hangsheng, a steel analyst at the business association, summed it up as "slightly reduced supply, low inventory and strong demand". This change in supply and demand is rapidly captured by the capital market.

At the end of April, domestic iron ore futures held a total of 716 thousand shares. By the end of May, the news of the closure of Vale came to the same day. The scale of iron ore futures rose to 1 million 152 thousand hands until June 8th, and this figure remained at 1 million 72 thousand.

The inflow of various funds, such as hedging and speculation, and the marked improvement of market concern, the domestic iron ore futures prices continued to rise, until the contract broke through 800 yuan / ton in recent months.

For the second half of the year, it is still difficult to determine whether the above 10% capacity of vale can resume in the short term.

He Hangsheng pointed out that assuming that the European and American countries will be dragged down by the epidemic in the second half of the year, there will be a significant decline in demand side. Several large mines can also balance the supply and demand relationship by reducing the scale of production. "Until the data in the two quarter are all released, the upstream mine may also make adjustments to the annual output target."

At that time, if the situation goes down to the level of the mine's annual output, it will bring a very strong price support for iron ore.

Smelting end profit continued to rise

In the short term, the rapid rise of iron ore prices is also proceeding along the industrial chain to the downstream industries and the capital market. The trend is the Lido upstream mine and the downstream smelter.

Lange Iron and steel data show that since the end of April this year, domestic steel production profits have been rising for two consecutive months. Average gross profit of seven steel varieties including thread and billet was 234 yuan / ton in May 8th, and the gross profit margin increased to 370 yuan / ton by June 5th.

However, in May this year, the ore used in the steel plant came from the stock in April, when the price of ore had not yet risen noticeable. "The cost side change will lag for one month, and the profit to the smelter end will be reflected in June." Wang Guoqing, director of Lange Iron and Steel Research Center, said.

Wang Guoqing pointed out that after entering the June, the high temperature and rainy weather increased, and the terminal demand is also facing some weakening expectations. The price of the superimposed cost side and the price of coke are rising, and the profit margins of steel production will be narrowed.

Comparison of steel prices such as screw steel can also be seen, since May, the price increase of finished products is significantly less than iron ore increase.

In fact, the steel industry is not optimistic this year. The contradiction between supply and demand of steel still exists.

Han Weidong, vice president of friends of steel group, recently said at the Lange Iron and Steel Conference, "China's output increased from 1 to April, 1.3%, 2% in May and 2% in June. It is still growing rapidly. About 1 million tonnes of capacity will be resumed in the second half of the year, so we are facing enormous pressure to supply. "

After the sharp rise in iron ore prices in May, the China Steel Association quickly communicated with vale in early June. At that time, Vale said that the company's output and operations were not affected by the epidemic this year, and plans to increase the volume of iron ore shipments in China in 2020.

As a result, the news of the shutdown of the ETA Bela comprehensive mine last weekend was confirmed, and iron ore futures rose again in June 8th.

Facing the potential downside risk of the industry, the A share market does not play the game according to the principle of common sense. For example, Jinling mining and Shougang Group Limited trading in June 8th, and some other special steel enterprises with relatively stable profitability have also risen slightly. In contrast, although the domestic ore is not as good as the imported ore, there is also a certain price hike. The main business of Jinling mining is iron ore mining. In 2019, more than 74% of its revenue came from iron concentrate.

"Iron ore resources are decreasing year by year, and only 850 thousand tons of annual output of the mine and the iron ore in the Wang Wang Zhuang mine of the Jinding mining industry can be used. The company is facing the situation of exhaustion of resources, but later it is expected to ensure the production of fine powder through mining assets and iron ore mining. Tianfeng Securities pointed out in the analysis of Jinling mining.

However, under the general trend of oversupply, the phased change of supply and demand relationship is doomed to be difficult to endure.

The current futures market is not optimistic about the long-term rise of ore. In June 8th, the contracts for iron ore futures were mostly 700 yuan / ton and below.

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