Iron ore prices have little room for decline

In the first half of September, iron ore passed a contrarian rise under the speculation of steel mills' winter storage and other factors, and once touched the highest point of the year, but was quickly dragged down by the steel market and fell. The industry expects that the price of iron ore will fall within the next year, but not much.

Up to now, there have been many controversies about the changes in the future price trend of iron ore in the market, showing a trend of polarization. A research report issued by Standard Chartered Bank predicts that by the end of the fourth quarter of this year, China's cost-plus-freight (C&F) spot price will reach US$200/ton. The supply shortage will maintain the average price during the period from 2012 to 2014 at 181 US dollars / ton. The steel companies in the market are divided into two groups. Optimists represented by Rio Tinto, BHP Billiton and Vale's three major mining giants believe that the demand for iron ore will continue to grow in the future and should continue to expand production capacity to meet the iron ore requirements. Market demand. The pessimists believe that the supply and demand of iron ore will be reversed, and the high price of iron ore will not be.

On the demand side, due to the slowdown in the global economy, steel demand has continued to slump. According to industry insiders, shipbuilding, automobiles and real estate have the greatest demand for steel. However, due to the current bad economy, reduced shipbuilding volume and decline in automobile sales, U.S. real estate has not yet been restored, and China’s real estate is in a deceleration process. The weakening of downstream demand from real estate and machinery industries directly led to the weakening of upstream iron ore demand.

China is the world’s largest importer of iron ore. China’s demand has a certain degree of impact on the price trend of spot iron ore. Current domestic imports have also changed the situation of relying too heavily on the three major mines. According to customs statistics, from January to July this year, China imported 389 million tons of iron ore from 58 countries and regions in the world, an increase of 7.21% over the same period of last year. Among them, the amount of iron ore imported from Australia, Brazil, and India accounted for 75.4% of the total imports during the same period, compared with 81.1% of the total imports of iron ore imported by the three countries in the same period last year, a decrease of 5.7 percentage points. .

At the same time, there may be excess supply. At the China Iron and Steel Raw Materials International Symposium held on September 27, Zhang Changfu, deputy chairman and secretary-general of the China Iron and Steel Association, said that the current inventory of iron ore ports has hit a record high, and the contradiction between supply and demand has been very prominent. Dai Zhihao, deputy general manager of Baosteel Group Co., Ltd., said that optimistically, iron ore supply and demand will reverse in the near future.

Iron ore is a similar to an oligopolistic market. Resources are concentrated in the hands of the three major mines. If they do not lower their prices, they will support iron ore prices. Industry insiders told Investor that unless the world economy shrinks further and declines, there will be worse cases, otherwise there will not be much decline.