The upward space of the hottest iron ore is limite

2022-08-04
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The upward space of iron ore is limited

recently, the trend of iron ore contracts in recent and far months has been divided, and the trend of 1801 contract has been repeated. This is a major theme of the three-day China International Engineering Plastics Industry Innovation Conference. 1805 contract has risen sharply, and the far month contract has returned to the status of premium. We believe that the rebound of iron ore is mainly to repair the excessive pessimism in the early stage. At present, it is difficult to find the driving force to promote the sustained rise of iron ore. Under the background of large-scale production restriction of steel mills from the fourth quarter to the first quarter of next year, iron ore spot is facing a big test, and the rebound of contracts in recent months will be limited

the short-term rebound repaired excessive pessimism

the 1801 contract, the main iron ore contract, fell from a high of 609.5 yuan/ton in late August to a low of 425.5 yuan/ton in the early stage, with a cumulative decline of 184.0 yuan/ton, or 30.19%. The large-scale production restriction of steel mills in the heating season was the main driving force for the decline of iron ore

we note that the low point of 1801 contract is 425.5 yuan/ton, equivalent to 51.2 dollars/ton. 2015 was the lowest stage of the whole industry. The industrial chain was facing substantial losses, and steel enterprises passively reduced production in a large area. In that year, the average spot price of Platts' iron ore was $55.5/t. Compared with 2015, the current situation of the whole industry is much better, especially the industrial chain has considerable profits, and the profit of screw thread steel has even remained above 1000 yuan/ton for a long time. Therefore, referring to 2015, the low absolute disk price in the early stage is the main factor causing the rebound

the steel plant will face more large-scale production reduction in the later period

after October, Wuan, Hebei and Tangshan successively announced to implement the production restriction in heating season ahead of schedule. In Wu'an area, 46 blast furnaces of 14 iron and steel enterprises have been limited in production according to the proportion required by the government, and some enterprises have limited their production by more than 60%. On October 12, Tangshan Municipal government issued a document requiring the iron and steel enterprises to limit the production of sintering by 50%, and on October 23, it increased the scale again, requiring the iron and steel enterprises in the city to stop all sintering machines and shaft furnaces using wet desulfurization, and continue to stop and limit the production of sintering machines using semi dry desulfurization by 50%. The time for limiting production in major steel production areas was advanced, and the strength was also continuously strengthened, exceeding market expectations. The "2+26" heating season officially began on November 15 and lasted four months. According to our estimation, if all cities limit production by 50%, the output of crude steel will be reduced by 40million tons, and the demand for iron ore will be reduced by about 60million tons. Moreover, judging from the national requirements for environmental protection and the implementation of previous production reductions this year, it is possible to continue to increase the intensity of production restriction in the later stage

at present, the available days of imported ore inventory in the steel plant is 25 days, which belongs to the medium and high level. If a large number of steel mills limit production by 50% in the later stage, the actual available days of raw material inventory will be much higher than now, and the steel mills may face greater inventory pressure, which does not rule out the possibility of further de stocking

spot looseness limits the rebound space of futures

after October, with the intensification of production restriction by steel mills, the port dredging volume of imported mines decreased significantly. In mid September, the daily average port dredging volume once reached 2.9564 million tons, and after October, the daily average port dredging volume was only 2.64 million tons. After the steel plant's production was limited, its willingness to purchase was depressed, and the spot iron ore was easy to fall but difficult to rise. In particular, the utilization of Chery EQ1 electric vehicles, a relatively strong medium and high-quality product resource in the early stage (hereinafter referred to as Chery company), made up for a sharp fall. PB has fallen by 100 yuan/ton since the middle of the month when it was turned off in the opposite order in September. The price difference between high-end and low-end products has narrowed rapidly. The price difference between Pb and ultra special has fallen rapidly from the high of 233 yuan/ton on September 19 to the current 193 yuan/ton

as mentioned above, with the intensification of production reduction in the later stage, on the one hand, steel mills' demand for iron ore declines, on the other hand, there is pressure to destock. In addition, from the historical experience, the fourth quarter has always been the traditional peak delivery season for foreign mines, and the supply pressure in the later period is also increasing. It is difficult for the spot iron ore to strengthen significantly. Although Yuanyue iron ore is expected to improve, there is no two wheel drive strategy between modern service industry and advanced manufacturing industry to solve the spot contradiction. The weakness of spot will suppress the rebound space in recent months, thus dragging down the Yuanyue contract

to sum up, we believe that it is difficult to find the driving force for the continuous rise of iron ore at present, and the contradiction between supply and demand is obvious. Under the background of large-scale production restriction of steel mills from the fourth quarter to the first quarter of next year, the spot iron ore still faces a big test, which will limit the rebound space of futures

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