Iron Ore'S Annual Rise Of Nearly 50% Crowned "King Of Commodities", Market Risk Tips Released By Dashang

At the end of December 4, the price of iron ore futures rose to a new high since listing, breaking through 950 yuan / ton and closing at 972 yuan / ton, up 4.24% on the same day. It is worth mentioning that iron ore is crowned the "king of commodities" in 2020 with an annual increase of 49.88%.

"Now this kind of rising method has been very exaggerated." An industry source told reporters, "the whole market's wait-and-see mood is very strong, especially retail investors, now it is difficult to have a large number of speculative funds into the market."

He told reporters that, because the current price has reached a high level, the reasons for the soaring iron ore price in this period of time include the domestic demand for downstream steel products in December, which is not weak in the off-season season, but also the supply that is lower than expected and the recovery of overseas demand exceeding expectations.

Not only the futures price, but also the price index of 62% grade iron ore, which reflects the spot trading price, also rose to 145.3 US dollars / ton on December 4, an increase of more than 5% compared with the price on December 3, breaking a seven-year high.

"Production is difficult to keep up with demand and the global steel market has seen a sharp rise in recent weeks. In particular, the rebound in the manufacturing sector is likely to continue into the first half of 2021, supporting the prices of steel, non-ferrous metals and raw materials. " Said Paul Bartholomew, head of global metals market insight at S & P in Asia Pacific.

On the evening of December 4, Dalian Mercantile Exchange issued a market risk warning, stating that the iron ore market price has fluctuated greatly in recent years. All member units are requested to strengthen investor education and risk prevention, and remind customers to participate in futures trading rationally and in compliance.

The increase in supply is not as expected

According to the public data, the pace of iron ore procurement of steel mills slowed down this week, and the average daily port dredging volume fell to below 3.2 million tons; on the other hand, the number of ships in port dropped to a low level of more than five months, and the port pressure resources continued to release.

At the same time, the iron ore inventory in the port has decreased to 1.241 million tons, which has decreased to 4.46 million tons.

According to the change of inventory data, due to the high temperature and rainy summer, the downstream especially construction demand is restrained, and the consumption has not fully recovered, the inventory low point of the whole year reached 106 million tons in June, and then rose all the way to 128 million tons on November 6.

"In the previous expectation, after entering December, it is generally the off-season of steel demand, and gradually enter the winter storage market, and the iron ore will also have a accumulation phenomenon." Wang Yangwen, an analyst with standard & Poor's global Proctor, said, "but now the situation has changed, and the iron ore inventory has not met the expectations of market participants."

However, it was not expected that the long-term decline of steel inventory in the lower reaches of the market was expected to continue after the peak period of November. The fluctuation of this inventory coincides with the fluctuation of iron ore price rise. After that, with the decrease of inventory, the price of iron ore rises one after another.

From the supply side, the supply of Brazil's iron ore, which should have started gradually in the third and fourth quarters, also experienced some unexpected fluctuations.

According to previously published data, Vale currently estimates that this year's output will be between 300 million and 305 million tons, compared with the previous target of 310 million tons; meanwhile, it is expected that next year's output will reach 315 million to 335 million tons, which is also lower than the market's previous expectations.

On December 1, Luo Tiejun, vice president of China Iron and Steel Industry Association, held a video conference with Ma Sheng, the executive officer of Vale's ferrous metal business, and Mr. MacLeish, the director of global iron ore sales. According to reports, Vale's iron ore sales to China in the first three quarters of this year accounted for nearly 70% of global sales, up from last year.

At the same time, Vale plans to achieve an annual output of 400 million tons of iron ore by the end of 2022, and will make investment to expand the annual production capacity to 450 million tons, in response to emergencies to ensure that the annual output of 400 million tons to meet stronger demand.

But it is clear that Vale's plans to increase production, at least in 2021, have not satisfied the market. "If we look at the minimum guidance volume, it will be 10 million tons more than expected this year, which is far lower than the previous market expectation." Wang Yangwen said.

December 4 closed, rising iron ore futures prices hit a new high since listing. Visual China

Stimulate or sustain demand

A number of market participants in an interview with reporters, all expressed for the current market caution and concern. "No one can say when the turning point of the market will come. The current market is too exaggerated." An industry source told reporters.

He told reporters that in the market's enthusiasm for iron ore, part of the worry about the supply situation in the first quarter of next year is reflected in the current price in advance.

According to statistics, this year, the total iron ore shipment volume of Australia and Brazil was 24.446 million tons, an increase of 736000 tons on a month on month basis; the total shipment volume of Australia was 16.771 million tons, an increase of 95000 tons on a month on month basis; and the total shipment volume of Brazil was 7.675 million tons, with an increase of 641000 tons on a month on month basis.

From the perspective of the rainy season in Australia, the average amount of iron ore transported in the southern hemisphere is easy to be affected by hurricanes. This situation will be more obvious after the end of December and the beginning of January. Meanwhile, the rainy season in Brazil is likely to come ahead of schedule, which will further lower the supply expectation for the first quarter of next year.

In terms of downstream demand, due to the slowdown of winter demand, steel prices are slowly falling. At the end of December 4, rebar futures was 3900 yuan / ton, up 0.13% slightly on the same day, but it had dropped by more than 120 yuan / ton compared with the middle and late November.

"At present, the profit of the steel mill is about 450 yuan." "According to the futures prices of coke and iron ore, the profits of steel enterprises are very low, because they were bought at a relatively low price before, so the profits can be maintained," a steel enterprise told reporters. But if we follow this rhythm, iron ore will go up and steel will go down, it will be very fast for profits to decline. "

It is reported that the national development and Reform Commission held a meeting on November 30 to comprehensively plan and speed up the planning and construction of intercity railways and urban (suburban) railways in Beijing Tianjin Hebei, Yangtze River Delta, Guangdong, Hong Kong and Macao Dawan district.

According to the meeting, in the next five years, about 10000 kilometers of intercity railway and urban (suburban) railway will be built in the three regions, and the framework network of regional intercity railway and urban (suburban) railway will be basically formed by 2025, and 1-2-hour traffic circle of urban agglomeration and 1-hour commuter circle of metropolitan area will be formed. At the same time, we have sorted out the three-year project plan, with a total construction scale of about 6000 km, and accelerated the construction of a number of relatively mature intercity and urban (suburban) railway projects.

Although compared with the manufacturing and construction industries, the railway consumption is not high, but such news is undoubtedly encouraging for the current market. In addition, demand from non China markets has also recovered rapidly.

Even as the epidemic continues to spread in the United States, Europe, India and parts of South America, industrial activity has begun to recover. Countries such as Japan, South Korea, India and the United States, whose steel and other metal industries rely mainly on automobile manufacturing, have cut production in response to a sharp drop in demand. But now demand has overtaken supply, meaning customers who want to buy steel may have to wait months to receive the goods.

Shortage of supply has pushed steel prices to multi-year highs. India's hot-rolled coil (hot rolled coil is the main steel used in the manufacturing industry) has reached its highest level in a decade, and the price in the United States has risen by $350 / T since August.

"Although the price of imported iron ore has returned to a six-year high of 130 US dollars / ton (856 yuan / ton), it has not had a significant adverse impact on the profit margin of steel mills." Paul Bartholomew said, "many countries are expected to invest heavily in infrastructure to support recovery after the outbreak, as well as other incentives and monetary incentives. In the United States, the market expects the incoming Biden administration to eventually start more urgently needed infrastructure projects. "

Under the stimulation of overseas demand, the crazy iron ore will reach its peak.