Crazy iron ore: who is the driver behind the 7-year high?

category:Finance
 Crazy iron ore: who is the driver behind the 7-year high?


On December 2, the main contract of domestic coking coal futures closed at 1536 yuan / ton, up 4.14% on the same day. In terms of closing price, it set a new record of the commodity futures since the end of 2016; in terms of coke, it closed at 2578 yuan / T on the 2nd, a new high in nearly two years.

Whether its iron ore, coking coal or coke, all reflect the booming scene of the steel industry in recent years. However, in the process of this round of rise, we can also see some speculations. Compared with the fundamentals, the price increase of iron ore is still somewhat exaggerated.

In China, this years gold nine silver ten market continued in November, and the already good downstream market was more active under the stimulation of real estate investment. In fact, by the end of November, the steel price has risen to more than 4000 yuan, but the downstream side is still actively purchasing. A steel mill source told reporters, the proportion of rebar in the whole construction cost is not high. In order to complete the projects invested in the third or even the second quarter, even if the price continues to rise, the downstream can also accept.

According to the calculation of CISA, the apparent consumption of crude steel from January to September was 769 million tons, an increase of 8.94% year-on-year, 1.7 percentage points higher than that of January August. The start of major national investment projects and the rapid recovery of downstream industries such as automobiles and household appliances have boosted the demand for steel.

The vigorous demand keeps the steel profit at a high level. Wang Yangwen, an analyst at standard & Poors global Proctor, told reporters that at present, the profit of domestic plate enterprises has reached 450 yuan / ton. This is a very good profit level for the whole year. She said.

Under the stimulation of higher profits, from January to September this year, Chinas crude steel output was 781.59 million tons, an increase of 4.5%; pig iron output was 665.48 million tons, a year-on-year increase of 3.8%; steel output was 964.24 million tons, a year-on-year increase of 5.6%.

It is worth mentioning that this is also the first time in the history of Chinas crude steel production to exceed 1 billion tons. In the winter of last year, environmental protection and production restriction, a major factor restricting the production increase of Chinese steel enterprises, did not seem to meet the strength of previous years.

On November 3, the office of Tangshan Municipal Peoples Government printed and issued the Tangshan 2020-2021 autumn and winter air quality enhancement assurance program (hereinafter referred to as the program). According to the plan, from 0:00 on November 1, 2020 to 24:00 on March 31, 2021, except for Shougang Qiangang Steel Co., Ltd. with performance rating of a and Shougang Jingtang company adopting independent emission reduction, other Tangshan steel enterprises shall implement production suspension and restriction to varying degrees.

In the current situation of steel production reduction, the willingness to expand is weak. Gan Yong, an analyst of iron and steel network, told the reporter, secondly, after years of investment in environmental protection facilities, the production capacity that does not meet the requirements and must be stopped is already a small number. The current production restriction measures are more likely to be a normalized production restriction. With the upgrading and transformation of environmental protection facilities of enterprises, such restrictions will be gradually relaxed, and finally make these enterprises that meet the requirements benefit, so as to continue to make profits for these enterprises Investment in environmental protection.

The driver of price riots

He told reporters that even though markets such as the United States, Europe, Japan and South Korea recovered faster than expected, they did not reach the level of last year. In the United States and Europe in particular, scrap rather than iron ore is mainly used. At present, the price of iron ore is still too exaggerated, and there is also the enthusiasm of market traders to take goods

According to statistics, this year, the total iron ore shipment volume of Australia and Brazil was 24.446 million tons, an increase of 736000 tons on a month on month basis; the total shipment volume of Australia was 16.771 million tons, an increase of 95000 tons on a month on month basis; and the total shipment volume of Brazil was 7.675 million tons, with an increase of 641000 tons on a month on month basis.

From the current point of view, the supply in the fourth quarter will certainly continue the situation in the second and third quarters. Australias supply will remain the same as before, and Brazil will contribute more increment. The supply of domestic refined iron powder in winter is more abundant than in previous years, Wang said

In the past years, since Brazil and Australia belong to the southern hemisphere, they are easily affected by climate in winter, Australia is vulnerable to hurricane attack, while Brazil is vulnerable to rainy season, thus reducing the shipment of iron ore. This situation will be more obvious after the end of December and the beginning of January. Meanwhile, the rainy season in Brazil is likely to come ahead of schedule, which will further lower the supply expectation for the first quarter of next year.

From the port inventory data, after entering the winter last year, the iron ore has entered the winter accumulation stage, and the port inventory data is about 140 million to 150 million tons. But this year, the accumulation of iron ore has not occurred, and it began to decline gradually after the stock accumulated to 125 million tons.

Combined with steel inventory data, iron ore prices are likely to remain strong for some time to come. According to the statistics of my iron and steel network, in November, the social inventory and steel mill inventory of the five major varieties decreased by 4.4126 million tons, of which the screw thread inventory decreased by 2.9763 million tons, and the total inventory was only 3.035 million tons higher than that of the same period last year, and the screw stock was only 2.098 million tons higher than the market expected.

It is estimated that the total steel inventory in December will drop by about 2 million tons. At that time, the inventory level may be close to that of the same period last year, and the turning point of inventory may appear in the middle and late December. Wang Jianhua, chief analyst of iron and steel network of mine, said, it is expected that the demand for construction steel is still expected to maintain a year-on-year growth of no less than 10% in December, and the steel demand for manufacturing industry is still expected to maintain a growth rate of no less than 15%

Under the stimulation of sustained growth in demand, the profits of steel enterprises may also remain high, which also stimulates the follow-up sentiment of iron ore market. This years profit is about double that of last year. If the follow-up market situation is good, the profit level will continue to maintain, said the steel mill

Source: 21st century economic report author: Qi Yu, editor in charge: Wang Xiaowu_ NF