Since the middle of November last year, the strong rise of iron ore prices has aroused concern that it deviates from the fundamentals of supply and demand. Recently, many departments and institutions, including the national development and Reform Commission, the State Administration of market supervision and the China Iron and Steel Association, have proposed to strengthen market supervision and ensure the smooth operation of the iron ore market.
strong voice from multiple departments
On February 11, the national development and Reform Commission issued a document on the official wechat that in view of the recent changes in iron ore prices, the price department of the national development and Reform Commission and the price supervision and Competition Bureau of the State Administration of market supervision will send a joint research team to carry out research on iron ore price supervision in some commodity exchanges and key ports.
The research team will focus on understanding the recent changes in iron ore inventory and the participation of relevant enterprises in iron ore spot trading, and listen to the opinions and suggestions of relevant parties on strengthening the linkage supervision of the futures and spot market, and severely cracking down on fabricating and disseminating price increase information, hoarding, bid up prices and malicious speculation.
The national development and Reform Commission and the State Administration of market supervision will pay close attention to the market operation and price trend of iron ore and other bulk commodities, and further take effective measures to effectively maintain the normal order of the market.
On February 11, the official wechat of China Iron and Steel Industry Association said that according to the monitoring of China Iron and Steel Association, some mining enterprises recently violated business ethics and released and hyped false information, which seriously disturbed the fair order of the market and damaged the legitimate interests of market subjects. CISA said it would continue to cooperate with relevant government departments in market monitoring, further strengthen analysis and research, and promote the balanced development of the industrial chain and the smooth operation of the iron ore market.
The big commercial exchange also announced that it would further strengthen market supervision, seriously investigate and deal with all kinds of violations, ensure the smooth operation of the market, and raise the handling fee rate of multiple contracts of iron ore futures. Dashang pointed out that there are many uncertain factors affecting the operation of the market in the near future. Please the market subjects conduct rational and compliant transactions and shall not fabricate or spread false information.
price rise deviates from market fundamentals
Under the influence of regulatory policies, iron ore prices fell. During the night trading on February 11, the main iron ore contract of Dashang iron ore fell again to 770 yuan / ton, down 7.62%. Looking back at the recent trend, after falling to the lowest value of 509.5 yuan / ton in more than a year in mid November 2021, the price of iron ore rose steadily again. By the Spring Festival, the price of iron ore in China had increased by more than 60%. Since then, the price continued to remain high, approaching the 850 yuan / ton mark.
The general iron ore price index has basically maintained a similar trend. Since the middle of November 2021, the general iron ore index has risen all the way. By the Spring Festival, it has risen to around $150 / ton, an increase of more than 60% compared with the low value in mid November.
Many institutions pointed out that the current production of molten iron and crude steel is at a low level. Under the condition of weak supply and demand, the sharp rise of iron ore deviates from the fundamentals of supply and demand, and the factors of price speculation are large.
The pre Spring Festival Research Report of Baichuan Yingfu pointed out that before the Spring Festival, the orders of steel enterprises were basically completed, there was no procurement plan for the time being, the Liaodong market stagnated significantly, the domestic ore market was mostly on the sidelines, and the imported ore was strong and stable; Before the Spring Festival, the replenishment of steel mills has basically ended, and the procurement of steel enterprises stationed abroad is also mostly on holiday. The market trading atmosphere is becoming colder and colder.
Tianfeng futures research report pointed out that the actual demand for iron ore is relatively poor and is still accumulating. Steel mills have plans to resume production in the near future, but the degree of resumption is still limited.
Tianfeng futures pointed out that at present, the main contradiction of iron ore disk lies in macro expectations, and the test of demand will be in mid March. In addition to the resumption of production after administrative production restriction, we should pay attention to the stimulation brought by the higher than expected demand performance of finished products. In addition, the demand for medium and high products under the high profit of steel mills is still the main contradiction of demand.
Baocheng futures research report believes that the logic supporting the strengthening of ore prices in the early stage is weakening. On the contrary, it is difficult to continuously reduce the supply under high ore prices, while China’s inventory remains high, the supply is relatively loose, the subsequent ore fundamentals are easy to be under pressure and weaken, superimposed with policy regulation, and the risk of falling high ore prices is intensified.
