The Price Of Iron Ore Breaks Through 800 Yuan / Ton

The gradual implementation of the policy of limiting production in the iron and steel industry has brought about a fundamental turn for the whole market sentiment, and the iron ore with no two rising trends in the year began to turn.

The steel production restriction started in the off-season has been steadily promoted with the support of tax policy adjustment. In the face of the coming market peak season, there is still a risk of tight supply. Under the background of "double carbon target", steel industry is one of the industries with the highest carbon emission in China. According to the goal of carbon peak in 2025, the process of carbon reduction has inevitably entered a stage of steady progress, and the limitation of crude steel production is only one of the important steps.

At present, the domestic steel market is still in a weak situation of supply and demand. However, with the advent of peak season and the impact of production restriction measures, the expectation that steel products will be phased tight will rise. A person in the iron and steel industry pointed out to reporters that at present, the pressure of production reduction in the second half of the year is great, and it is still difficult to fully implement it.

In the second half of the year, if the steel price rises again and leads to the increase of profit margin, some enterprises may increase production for the sake of economic interests without clear punishment measures.

Expected production restriction drives iron ore down

A dynamic real steel production restrictions, led to iron ore futures fell sharply in recent days.

On the afternoon of August 19, Singapore iron ore index futures 09 contract fell below the $130 / t mark, the lowest since March 23, with a intraday drop of 12.85%. As of August 18, the Prussian iron ore index has fallen to 153.1 US dollars / ton, down nearly 30% in the past month.

In terms of domestic market, the main contract of iron ore of dashengsuo has dropped to 762.5 yuan / ton, a decrease of 7.18% within the day. It has broken through the key point of 800 yuan / ton, which is equivalent to the price level at the end of October 2020, with a drop of nearly 40% in the past month.

Since the end of July, with the implementation of production restriction policies in various regions, under the circumstances of obvious changes in market supply and demand, the price of iron ore futures, which rose wildly during the year, instantly went into a continuous falling process.

Since the end of 2020, many departments, including the Ministry of industry and information technology, have proposed to firmly reduce the crude steel output and ensure that the crude steel output drops year on year. However, in the first half of this year, due to the strong demand at home and abroad, the steel and iron ore market continued to maintain a blazing state, and the price soared to an absurd level. Under the stimulation of high profits, except for Hebei Province, which has strict production restriction, steel production in many places has increased significantly.

To achieve the target of production restriction, the pressure of the whole year fell to the second half of the year. Since July, the reduction of crude steel output has been implemented in succession and the effect is obvious. According to data released by the National Bureau of statistics on August 16, domestic crude steel production in July has dropped to a new low since April 2020. This trend continued in August.

From the perspective of policy, in addition to many departments shouting in succession, the new steel industry capacity replacement implementation measures were introduced, the early warning and release mechanism of production capacity information was improved, and in the first half of the year, the environmental protection and production restriction efforts in Tangshan and other places continued to be strict, so far there has been no relaxation, which shows the industry's determination to reduce crude steel production.

This determination has also significantly affected the iron ore market. As China's iron ore imports account for more than 60% of the global trade volume, the contraction of domestic steel production has led to a decline in iron ore demand, which directly brings marginal changes to the international market, and the price of imported iron ore has been significantly adjusted.

Wang Jing, a researcher at Lange Iron and Steel Research Center, told reporters in the 21st century economic report that a number of economic data, such as fixed asset investment, infrastructure investment and real estate investment, which are closely related to the iron and steel industry in July, fell in an all-round way, which led to the market's worry about the later steel demand, which further increased the expectation of steel production reduction and iron ore demand falling again.

Overseas, the economic recovery has gradually entered the top region after the epidemic, commodity demand is close to the peak, the improvement of US employment data and the enhanced expectation of the Federal Reserve's exit from easing all lead to the weakening of the momentum of commodity price rise, including iron ore, and the price may enter a long-term downward phase.

But at present, iron ore price is still significantly higher than that in previous years. If the current market supply and demand situation continues, there is still room for further decline in iron ore prices.

Steel industry should take the lead in carbon peak

Iron and steel industry is a domestic energy intensive industry, but also one of the industries with the highest carbon emissions. In 2020, China's crude steel production has exceeded 1 billion tons, accounting for more than half of the global crude steel production.

As an important part of the national carbon neutralization process, in addition to continuously promoting the transformation of ultra-low emissions in the iron and steel industry, controlling the growth of crude steel output is the most direct means to curb the growth of carbon emissions; At the same time, in order to put an end to the imported inflation of iron ore and further participate in the global iron ore pricing power, steel production restriction has become the general trend.

On July 30, the Political Bureau meeting of the CPC Central Committee proposed that we should do a good job in the work of carbon peak and carbon neutralization, and put forward an action plan to reach the carbon peak by 2030 as soon as possible. At the same time, we should correct the campaign of "carbon reduction" and put it into effect first and then break down.

Due to the advanced carbon peak schedule, the steel industry has also been short-lived by the campaign "carbon reduction" question. Previously, the China Iron and steel industry association suggested that the domestic steel industry should reach the carbon peak in 2025, while China Baowu group would strive to reach the carbon peak in 2023, both significantly ahead of the national standards.

According to the reporter of 21st century economic report, in the view of the industry, the so-called sports "carbon emission reduction" problem is not in the steel industry; At present, the goal of carbon peaking in iron and steel industry is reasonable and feasible.

Wang Guoqing, director of Lange Iron and Steel Research Center, told reporters of the 21st century economic report that many ministries and commissions have successively issued policies to guarantee the supply of domestic steel demand, which has paved the way for the smooth promotion of steel production restriction; Even if the target of limiting production this year is not achieved, the steel industry's output will probably fall to the top next year or the following year. With the implementation of capacity replacement and various ultra-low emission transformation measures, low-carbon metallurgical technology breakthrough, carbon dioxide recycling and other facilities, the carbon emission reduction of the steel industry will gradually become effective.

Carbon neutrality is also steadily advancing. At present, the iron and steel industry has completed the first draft of the implementation plan for carbon peak in steel industry, and solicited opinions from all parties. The plan basically defines the carbon peak path, key tasks and carbon reduction potential of the iron and steel industry, and also studies the corresponding technical support.

For the domestic iron and steel industry, the blast furnace converter long process production process is the main production process, and the output accounts for more than 90% of the national output; The redox reaction of iron ore and coke in the blast furnace smelting process is the main source of carbon dioxide emission in the whole process. However, the carbon dioxide emission from EAF steelmaking with scrap as raw material is significantly lower than that from long process. Therefore, improving the recovery and utilization of scrap steel is one of the important ways to realize carbon emission reduction in steel industry.

Zhang Qi of Northeastern University wrote an article that in addition to adjusting the structure of steel-making process, ultra-low carbon dioxide transformation projects, hydrogen metallurgy, carbon capture and storage (CCS) are important directions for low-carbon technological innovation in the iron and steel industry; The high value-added utilization of by-products in iron and steel production, such as the production of cement from blast furnace slag, steam and by-product coal used in power generation or chemical industry, can build a resource recycling system.

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