Iron ore prices hit a five-year low

In the cold winter of iron ore prices until November 26, the iron ore price of 62% of iron content in Qingdao Port fell 1.2% to US$69.58/ton the day before, which was the lowest since June 2009. Among them, the monthly iron ore price has dropped 13%, the largest decline since May.

“The price of iron ore has dropped to a new low in five years, and the oversupply is the main reason for the sharp fall in iron ore prices.” The relevant person in charge of the Hebei Tianzhu Iron and Steel Group stated to “China’s Union Business” that “wherein, the substantial increase in output has resulted in The oversupply of the world, the rapid increase in imports leading to high inventory levels, and the sluggish economic growth that led to weak downstream demand and Other factors have contributed to the current oversupply situation.”

This means that under the slowdown of downstream demand, the “bitter fruit” of upstream production expansion has spread to the entire steel industry chain. However, the protagonist of this brewing brewing "bitter bitter fruit" was replaced by the miners who had been flooded and dried up.

Based on the data from various parties, analysts believe that the downward pressure on iron ore prices in the later period is expected to continue, and will continue to bottom out, thus becoming the biggest uncertainty factor hindering the recovery of steel prices.

The iron ore bear market's arrogant posture will be lost.

Since the beginning of this year, the global supply of iron ore has increased significantly, and the downstream demand is clearly insufficient. The prices have continued to fall significantly and continue to refresh the low prices.

According to statistics, in the first half of the year, the world’s top four miners produced a total of 469 million tons of iron ore, a year-on-year increase of 12.9%. On the domestic front, although the output of iron ore per month showed a negative year-on-year growth in the past two months, from the cumulative situation in the previous 10 months, the domestic ore iron ore raw ores amounted to 1.258 billion tons, an increase of 6.4% year-on-year, only a year earlier. 0.3% lower.

"Under the circumstances that domestic and foreign iron ore producers' willingness to reduce production is not clear, it is expected that the supply of iron ore will far exceed demand growth in the year." Ma Zhongpu, chief analyst of China Steel Spot Net, told China Unicom.

Under this unconstrained production capacity, the price of iron ore dived directly—the price of iron ore from the Dalian Commodity Exchange fell from 920 yuan/ton at the beginning of the year to 465 yuan/ton in recent days, a drop of more than 45%.

The reporter’s statistics obtained from the China Iron and Steel Association show that as of November 21, the average price of domestically produced 62% grade dry iron ore concentrate was RMB 653.66/ton, which was 4.3% lower than the beginning of the month and 28.7% lower than that at the beginning of the year, compared with the same period of last year. Fell by 29.3%;

The 62% grade dry-base fines averaged US$70.57/tonne, which was 5.9% lower than the beginning of the month and 47.3% lower than the same period of last year. It was more than 50% lower than the 2011 high, which was the lowest level since mid-2009. .

At the same time, the decline in steel production is another major negative incentive for the recent fall in iron ore prices.

According to data from the China Steel Association, the average daily output of crude steel in the first half of November was 2,070,200 tons, a decrease of 16.36% from the previous month. The Hebei region was greatly affected by the APEC meeting, resulting in a significant reduction in production, which caused the operating rate in Hebei Province to drop sharply to about 75% in early November, which caused the overall output of crude steel to drop sharply.

China Steel Association also pointed out that after the end of the APEC meeting, the enterprises in the Hebei region resumed production in mid-November, and the national blast furnace operating rate has rebounded. In the current profit level, the initiative of steel mills to reduce production is not strong. However, taking into account the routine maintenance plan of steel mills from November to December is not a minority, so the overall demand for raw materials for steel mills has been reduced.

In addition, the Iron and Steel Import Early Warning and Monitoring Report of the China Iron and Steel Association in November 2014 showed that after the APEC meeting, it is expected that the spot demand for iron ore will be gradually released, and the ore price will rebound slightly, but taking into account the fact that the coldening of the weather will cause downstream steel products With the reduction of demand, there is insufficient incentive for the rebound in ore prices.

In addition, the current superimposed factors of the inventories of port inventories have further affected the impetus for iron ore prices to bottom out.

My steel network statistics show that as of the week of November 21, the country’s 41 major port iron ore inventories totaled 1.0805 million tons, an increase of 620,000 tons on a week-on-week basis. Port stocks rose for two weeks in a row, and spot trading in the port was cold, putting pressure on the market.

Based on the above-mentioned judgments of the fundamental weakness, international research institutes lowered the iron ore price forecast next year.

A few days ago, Citibank stated in a report that a further increase in market supply and further weakening demand in 2015 will again push down iron ore prices. Citibank expects iron ore prices to be the lowest in the third quarter of next year and will briefly fall below $60, with an average price of $60 per ton.

The report said that prices need to be maintained at the level of 60 US dollars, will suppress iron ore production outside China, and said that China's iron ore production needs to further decline. "If the price of iron ore is maintained at the level of 70 U.S. dollars, it may only be a modest reduction in production, and maintaining a level of 60 U.S. dollars will only lead to a significant reduction in production," Citibank predicts.

The price of steel was further pressed into the "curse" of iron ore prices. The steel industry has been unable to extricate itself - it has not enjoyed the thrill of falling iron ore but has lost the support of steel prices.

With the fall in iron ore prices, the production costs of steel enterprises have been reduced, their profitability has also improved, and at the same time, another negative impact of falling iron ore prices has gradually emerged – due to the lower cost support to steel prices. The decrease provides new space for the lower steel prices.

“As a result of its oppression, it is expected that steel prices will continue to bottom out in the first few months of 2015.” Li Xinyu, senior analyst at the China International Electronic Commerce Center’s domestic trade information center, told China’s United Daily News.

The reporter found that the quoted price data found that in the construction steel market, the price decline is increasing. The ton price in Shanghai, Fuzhou and other places fell by 10 yuan to 150 yuan a week.

"From the Shanghai market, we can see that the impact of the rebar fell, the spot steel market's panic has increased, businesses are generally accelerating the speed of shipments." Ma Zhongpu analysis, but due to very weak market transactions, In addition, the steel products in the north are further transported to the south. They have been arriving for some time in recent days, and the confidence of the merchants in the market outlook is even less.

In the same way, the plate price market, where prices have always been strong, has seen an overall decline in prices. Data show that the hot rolled coil market is basically a weak consolidation, Shanghai, Nanchang and other places have risen slightly, but in Beijing, Tianjin, Shenyang and other places ton prices fell 10 to 90 yuan a week.

“If we look at Shanghai's hot coil market, which has risen slightly, it is mainly due to short-term factors that are closely related to certain specifications. In the long term, it is not optimistic. The demand of terminal companies remains relatively low,” said Ma Zhongpu.

While the plate market is generally weak, the ton price in Shanghai, Fuzhou and other places fell by 10 to 50 yuan a week. Short-term shortages of certain specifications of products also exist, but due to the insufficiency of terminal demand and poor market transactions, businesses cannot and do not intend to sharply increase prices.

“At present, the price of the steel market has entered a vicious circle. According to past experience, under the stimulation of the infrastructure investment in the country’s nearly one trillion yuan of railway water conservancy, there was an immediate effect on steel prices, but this time it was indifferent but fell. The person in charge of the above steel company stated.

In view of this phenomenon, Li Xinyu believes that due to the “bottom” of the iron ore market, it seems that it has not yet been found. It remains to be determined when the “bottom” is established.

According to the latest report of the “Nishijin Shinkansen”, in the domestic ore market, the prices of iron concentrate in Hebei Province have fallen slightly, and the tonnage price has dropped by around RMB 10 a week. The "short" atmosphere in the market has become increasingly strong.

The price of imported ore fell sharply. On October 20th, the 62% grade Platts iron ore index closed at a price of US$70.5 per ton, and dropped sharply by US$5 a week. As iron ore giants such as BHP Billiton, Rio Tinto and Vale have continued to increase supply, the industry has been lowering the forecast price target for iron ore.

At present, the import ore market is in a “bare” mood, and the main contract of iron ore ** has recently fallen below the limit, followed by a wave of heavy losses, and has been repeatedly refreshed. Port spot prices are also falling.

“The interactive and inductive adjustment of iron ore price and steel price is an intuitive reflection of the current structural adjustment of the steel industry,” said Li Xinyu.

“Overall judgment, the overall domestic steel market is still not optimistic overall.” The above-mentioned steel company officials said that as much as possible to reduce the company's production capacity and reduce iron ore procurement inventory or will be the focus of the next period of time the steel industry operations .