Crazy Iron Ore: The Price Rises Sharply To A New High In 7 Years, Who Is Behind It?

In 2020, iron ore will again become one of the most watched commodities.

"It's rising too fast. Iron ore is rarely seen in history. It's rising so fast." A trade person told the 21st century economic reporter. According to standard & Poor's global Proctor, the price of 62% grade iron ore was reported at US $131 / T at the end of last week, but it rose for two consecutive days this week, with the latest price of US $133.05/t, setting a six-year high in the index.

In terms of futures, on December 2, the main iron ore futures contract closed at 934 yuan / ton, up 3.53%. It has risen by more than 44% since the beginning of the year, and reached a new high since December 2013. Driven by iron ore, black is the main commodity contract of the public, which has reached new highs.

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 it's 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."

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Strong fundamentals

The continuous rise of iron ore, in the final analysis, is the strong market of global steel market.

In China, this year's "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 & Poor's 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.

Compared with the same period of last year, China's steel output increased by 4.596 million tons to 4.546 million tons, which was higher than that of the same period of last year.

"In terms of the daily crude steel production level, it did not exceed 3 million tons last year, but it has exceeded 3 million tons many times this year. It is estimated that the crude steel production this year will reach 1.05 billion tons, an increase of about 5% over last year." China Steel Association vice president and Secretary General Qu Xiuli said.

It is worth mentioning that this is also the first time in the history of China's 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 People's 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.

"First of all, steel enterprises in the current situation of profit expansion, the willingness to reduce production on their own 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 strong demand for steel is the main reason for stimulating iron ore prices." Wang Yangwen said, "the impact of the second wave of epidemic on the economy is far less serious than previously expected by the market. In addition to China, the recovery of iron ore demand in the United States, India and Europe is also very good, driving the global iron ore prices to keep rising."

The driving force of price riots

In the rapid rise of iron ore, more or less can see the shadow of market sentiment. "China's crude steel production has increased by 10% this year, and the global iron ore supply has not had any problems this year, but the price of iron ore is rising nearly 50% Said the steel mill.

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

A number of interviewees told reporters that part of the current mood is about the supply situation in the first quarter of next year, which is reflected in the current price in advance.

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. Australia's 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. After accumulating to 1.25 billion tons of iron ore this year, the cumulative situation did not appear in the iron ore warehouse.

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 year's 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