Domestic Demand Forces Iron Ore Price To Rise, Follow-Up Supply Or Tighten

Recently, iron ore prices continued to climb to new highs.

According to the S & P global Proctor data, the price's 62% iron ore index rose from 111.45 US dollars / ton at the end of July to 121.75 US dollars / ton on August 14 in the latest period, with an increase of more than 9%. According to the data of my iron and steel network, the price index of mineral powder and pellet of various varieties increased in different degrees last week.

"In fact, since May this year, iron ore has started a wave of price rise cycle." My iron and steel network iron ore analyst Yu Chen told reporters, "in addition to a consolidation in June and July, generally maintained a continuous upward trend."

This round of iron ore push up, in the period before and after showing different reasons. In the early stage, it was mainly affected by the epidemic situation, which led to fluctuations in the supply of foreign countries, especially Brazil; in the later stage, when the supply in July had basically returned to normal, the domestic demand was very strong, which promoted the rise of iron ore from the demand side.

Demand remains strong

As the absolute theme of promoting steel consumption, the real estate market, especially the real estate investment, has maintained a strong growth this year, which has boosted the downstream demand for steel in China.

According to the data released by the National Bureau of statistics, from January to July this year, the national real estate development investment reached 7532.5 billion yuan, an increase of 3.4% over the same period last year. Among them, the investment growth rate in July alone was as high as 11.7% year-on-year. Driven by the strong downstream demand, China's steel industry is enjoying a boom in production and sales.

According to the statistics of China Iron and Steel Industry Association, since August, iron and steel enterprises have accumulated an average daily crude steel output of 2.1534 million tons, with a month on month increase of 0.21% and a year-on-year increase of 5.14%. According to the monitoring of my iron and steel network, on August 7, the pig iron output of 247 blast furnace was 2.522 million tons / day, a record high.

Not only steel production, but also the import of steel and iron ore has set a new record.

According to the import and export express of the General Administration of Customs of China, in July 2020, China imported 2.066 million tons of steel, an increase of 728000 tons compared with the previous month, with a month on month increase of 38.8%; the import of iron ore reached a monthly high of 112.647 million tons, with an increase of 11.8% year-on-year.

"In the case of strong downstream demand, China's steel mills continue to push up the operating rate, resulting in a relatively tight iron ore resources." "Coupled with some structural problems with inventory in Chinese ports, the price of iron ore will rise," Yu said

By the end of August 17, the main futures price of domestic iron ore reached 834 yuan / ton, up 0.36% on the same day. Compared with the price of more than 910 yuan / ton at the beginning of the month, it has dropped a lot, and there is also a lot of gap from the high level of 920 yuan / ton last year. However, generally speaking, the iron ore futures price has fluctuated at the high level for a long time.

"Futures reflect market expectations for some time to come." Yu Chen told reporters, "traditionally, September and October are the peak seasons of the market, and the industry is optimistic about the market demand in the next two months. However, there is a trace of risk factors at present, and the futures price may maintain a high level and wide range of shocks in the future. "

Due to various factors such as epidemic prevention and control, a large number of iron ore ships berthed at berths outside the port, and the loaded iron ore did not enter the port and was included in the port inventory data.

From the middle of 177 to June, the quantity of iron ore in the port has risen rapidly, which has played an important role in relieving the shortage of iron ore in the port since the middle of August.

Limited space for incremental supply

Facing the rising price of iron ore, a steel mill told the 21st century economic reporter that the profit per ton of steel is still at an acceptable level because the downstream market demand is relatively strong.

"At present, the profit of steel mills is less than 200 yuan / ton, which is actually a relatively low position." He told reporters, "follow up if iron ore supply is sufficient, there can also be a relatively high level of profit."

In order to reduce the impact of high price iron ore as much as possible, steel mills choose to adjust the selection structure of raw materials, and adopt relatively cheaper and more loose supply of pellets to replace the relatively scarce powder ore, so as to reduce the purchase cost of raw materials.

There are some uncertainties in the subsequent supply of iron ore. At present, the overall shipment volume of Australia's four major mines is relatively stable, basically reaching the highest capacity utilization rate. After the end of the last fiscal year, port shipment has entered the seasonal maintenance time, and the enthusiasm for shipping may decline slightly in the future.

Brazil, according to Vale's previous forecast, the annual production target is maintained at 310 million tons, with 130 million tons in the first half of the year. After the expansion of its s11d project, the company's theoretical output can reach 400 million tons per year.

"Short term iron ore supply and demand as a whole is still in a tight balance. It is expected that the demand may decline and the price will fall in September under the expectation of production restriction." Yu Chen told reporters, "on the supply side, there may be a certain reduction in the transport volume of Australia and Pakistan. In terms of domestic mine supply, the monthly output of domestic mine has reached 23.8 million tons, and the space for subsequent increase is limited. "

"From the demand side, the blast furnace operating rate is at a high level, the hot metal keeps increasing, and continuously sets new highs in the year. The overall demand for iron ore is strong. Due to the improvement of performance price ratio, the steel mills will adjust the mix proportion, and the structural contradictions among varieties will be gradually alleviated, and the situation that the fine ore leads the rise will be broken." Yu Chen said.

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