The change of iron ore price in the off-season has triggered the continuous release of strong regulatory signals from the national development and Reform Commission, the State Administration of market supervision and other departments.
On February 18, the relevant notice jointly issued by 12 departments including the national development and Reform Commission mentioned again the contents related to iron ore: ensure the supply and stable price of important raw materials and primary products such as iron ore and chemical fertilizer, further strengthen the supervision of commodity futures and spot market, and strengthen the monitoring and early warning of commodity prices; Support enterprises to invest in the development of iron ore, copper ore and other mineral development projects that meet China’s resource conditions and the requirements of ecological and environmental protection.
Before this issuance, the regulatory authorities continued to release strong regulatory signals recently. Just the afternoon of the previous day, the official wechat of the national development and Reform Commission announced that in view of the recent abnormal situation that the supply and demand of the iron ore market is generally stable but the price rises sharply, the price department of the national development and Reform Commission and the price supervision and Competition Bureau of the State Administration of Market Supervision recently went to Qingdao to carry out joint supervision research.
The intensive release of regulatory signals also cooled the iron ore rapidly, and the price of imported iron ore adjusted sharply downward this week (February 14-february 18). At the same time, funds also began to flow out rapidly. Only on February 18, 550 million yuan of funds flowed out of the main contract of iron ore futures, becoming the commodity with the largest capital outflow on that day.
Many people in the industry told the daily economic news that due to the lack of support from the fundamentals of supply and demand, the iron ore price seriously deviates from the market trend of the steel industry, and the strong rise is unreasonable. With the intensive introduction of policies, the adjustment of iron ore price is not expected to be over, and it may show a weak shock trend next week.
regulators have made continuous moves
On the afternoon of February 18, the national development and Reform Commission, together with 11 other departments, issued a notice on several policies to promote the steady growth of the industrial economy. Under the policy of ensuring supply and price stability, the national development and Reform Commission once again supervised iron ore and other bulk commodities.
For iron ore, the above notice mentioned that we should ensure the supply and price of important raw materials and primary products such as iron ore and chemical fertilizer, further strengthen the supervision of commodity futures and spot market, and strengthen the monitoring and early warning of commodity prices; Support enterprises to invest in the development of iron ore, copper ore and other mineral development projects that meet China’s resource conditions and the requirements of ecological and environmental protection.
The reporter of the daily economic news noted that since February 9, the regulatory authorities have made intensive statements in response to the recent changes in iron ore prices and other relevant situations. Behind the regulation is the change of iron ore price in the off-season of demand.
According to the information from Lange Iron and Steel Research Center, the price of imported iron ore has continued to rise since late November last year. During this period, the resumption of production of steel mills has driven the price to a certain extent, but the price has continued to rise, with an increase of more than 70%, lacking fundamental support.
This has also attracted the attention of regulators. On February 9, the State Administration of market supervision and the national development and Reform Commission jointly issued a document saying that relevant iron ore information enterprises have been interviewed recently, pointing to fabricating and spreading price increase information and driving up market prices.
Since then, the national development and Reform Commission announced on February 17 that recently, the multi sectoral research group fully understood the changes of Qingdao Port International Co.Ltd(601298) iron ore inventory and held a special meeting to remind and warn some iron ore trading enterprises to release excessive inventory and return to a reasonable level as soon as possible.
According to the notice of the meeting disclosed by the media, in order to ensure the stable operation of the iron ore market, the price department of the national development and Reform Commission and the price supervision and Competition Bureau of the State Administration of market supervision held a special meeting on reminding and warning in Qingdao on February 17. The attending enterprises include Ruigang Union, Tangshan Kairong, Tangshan haichi, Ningbo Gujian, Rizhao JINGMAO, Glencore, mercuria, Trafigura, Itochu and Cargill. It is reported that the enterprises participating in the meeting on February 17 are mainly engaged in overseas commodity trade business.
Previously, on February 15, the price department of the national development and Reform Commission, together with the State Administration of market supervision and the futures Department of the CSRC, held a special meeting to remind and warn. The participating enterprises include Minmetals Group, CITIC metals, AVIC international mineral resources, Xiamen Construction and development, Jidong development, Xiamen Itg Group Corp.Ltd(600755) , Wuchan Zhongda Group Co.Ltd(600704) , Zheshang Development Group Co.Ltd(000906) , Xiamen Xiangyu Co.Ltd(600057) .
“After talking about state-owned enterprises and private (foreign) enterprises, warn one by one that the above participating enterprises are important participants in China’s iron ore trade.” An authoritative figure in China’s iron and steel industry told the reporter of daily economic news.
Behind the emergence of intensive regulation, the rise of iron ore prices is too abnormal.
Wang Guoqing, director of Lange Iron and Steel Research Center, told the daily economic news that the sharp rise in iron ore prices this round was carried out when China’s iron and steel demand was in the seasonal off-season, production restrictions were still persistent, and port iron ore inventories remained high. The fundamentals of the iron ore market could not form a support for the rapid rise in iron ore prices, Therefore, the speculation factors of this round of rise should not be underestimated.
iron ore price adjustment has not ended
The continuous arrival of supervision, from interviews with iron ore information enterprises to interviews with iron ore trading enterprises, released the signals of the competent authorities to crack down on the fabrication and dissemination of price increase information, hoarding, bid up prices and malicious speculation, and the market soon moved.
According to the information from Lange steel network, on February 10, the Platts iron ore price index reached US $153.8/ton, up US $66.6/ton or 76.4% from the low of US $87.2/ton on November 18 last year. After the high of 849.5 tons of iron ore on November, the price of iron ore fell.
According to a person from an iron and steel enterprise, due to the lack of fundamental support, iron ore prices have been adjusted at a high level with the strengthening of research and supervision by the national development and Reform Commission and relevant departments.
According to wind data, as of the closing on February 18, the main contract of iron ore 2205 futures closed at 685 yuan / ton, down 20.64% from 833.50 yuan / ton on February 14 this year.
After the continuous release of regulatory signals, the price index of imported iron ore was significantly adjusted this week (February 14-february 18). According to the monitoring data of Lange steel cloud business platform, as of February 18, 58% of the Australian powder index was $99 / ton, down $19 / ton from last week; 61.5% Australian flour index was $111 / ton, down $21 / ton from last week; 62% of the Australian block index was $151 / ton, down $18 / ton from last week.
While the price of iron ore is down, the real demand of steel enterprises in the off-season of the industry has not changed. The blast furnace operating rate of 247 steel mills surveyed by Mysteel was 69.58%, an increase of 1.39% month on month and a year-on-year decrease of 19.93%; The utilization rate of blast furnace ironmaking capacity was 75.44%, with a month on month decrease of 1.13% and a year-on-year decrease of 17.01%.
Wang Jing of Lange Iron and Steel Research Center told the reporter of daily economic news that at present, the blast furnace operating rate of major iron and steel enterprises in China has dropped to a low level again, the terminal demand for steel has not been significantly started, and the adjustment of iron ore price is not expected to be over. It may show a weak shock trend next week.
At the same time, in Wang Guoqing’s view, the recent supervision and investigation of relevant markets by the national development and Reform Commission will help all parties in the market treat correctly, effectively promote the stability of the iron ore market and maintain normal order.
It is worth noting that China’s dependence on imported iron ore exceeds 80%, making it the world’s largest iron ore importer. The industry association is also communicating with the four major international iron ore suppliers and paying attention to the breach of the long-term association.
Information from CISA shows that on the morning of February 14, Luo Tiejun, vice president of China Iron and Steel Industry Association, held a video conference with Simon farry, vice president of iron ore marketing of Rio Tinto. Luo Tiejun pointed out that the sharp fluctuation of iron ore prices is not conducive to the development of the industrial chain and the long-term interests of all parties. He hoped that Rio Tinto would continue to attach great importance to the demands of Chinese steel enterprises and ensure the implementation of the long-term agreement contract.
The tracking data of Lange steel network shows that the shipment increment of Rio Tinto and BHP Billiton is about 8-10 million tons; FMG shipping increment is relatively small, with 1 million tons, and vale shipping increment is about 10 million tons. Overall, it is estimated that the annual increment of the four mines will be 28 million tons in 2022, an increase of about 2.5%.
From the supply side, China’s iron ore resources are relatively abundant. According to Mysteel statistics, as of February 18, the imported iron ore inventory of 45 ports in China was 160.3405 million tons, an increase of 1.4411 million tons compared with February 11, continuing to hit a new high since June 2018.
Wang Guoqing told the daily economic news that with the increase of supply, the supply-demand relationship in the imported iron ore market will tend to be loose in 2022, and the overall price will be significantly corrected.
