Domestic iron ore is not optimistic about long-term demand

After the Spring Festival, domestic iron ore stocks remained high, prices weakened due to weak demand, and the overall oversupply situation. However, it is worth noting that, although the previous steel mills significantly limited production, but iron ore stocks did not increase significantly, maintained at 90 million tons, ore overall demand in the off-season contraction is not obvious. It is reported that the latest increase in the decline in steel stocks has declined. Major steel mills may increase ore procurement to restore production scale in the near future. It is expected that ore demand may increase in the short term, but overall iron ore demand is not optimistic in the medium to long term. .

In 2011, the total domestic primary ore production reached 1.327 billion tons, a year-on-year increase of 27.15%. Domestic mine production was 69,361,100 tons, of which 62,337,600 tons were in December. As a whole, the output of iron ore raw ore in 2011 increased by 24% from 2010. Last year, China’s total import of iron ore exceeded 687 million tons, a year-on-year increase of 67.89 million tons, a year-on-year increase of 11%. On the whole, with the increase of domestic ore output, the proportion of imported ore will gradually decline, and the price influence will gradually weaken.

In the short term, iron ore demand may increase. Last year, the average monthly excess output of iron ore in China remained at around 45 million tons. With the increase in imports and domestic production, it is expected that the overall inventory in 2012 will still remain surplus. Last December, the production of pig iron, crude steel and steel increased by 3.73%, 0.65% and 5.95% respectively year-on-year. According to the output of 1 ton of pig iron produced from 1.65 tons of iron ore finished product, a total of 79.221 million tons of iron ore finished products were required in December last year. Taken together, demand for iron ore rebounded in November from November last year, which is the first time since the continuous decline in May last year. However, combined with the supply of iron ore, iron ore is still in an oversupply situation. In December, the surplus amounted to 46.79 million tons. In the third quarter of 2011, as steel prices fell sharply and steel prices entered a downtrend channel, the profits of steel companies contracted sharply, the enthusiasm of production companies weakened, and ore demand shrank. However, after the Spring Festival, the growth rate of steel social stocks declined, and the major steel mills may increase ore procurement in the next phase, and ore demand may increase rapidly.

The demand for iron ore in the medium and long term is not optimistic. In the first nine months of 2011, domestic iron ore prices oscillated upward, but as spot prices fell sharply in October, iron ore prices also weakened. As of January 17, 2012, the price of Tangshan Iron Powder fell from the highest of 1,560 yuan/ton in 2011 to 1,190 yuan/ton, a drop of 24%. In the same period, the price of imported ore also fell sharply. On January 17, 2012, the import price of iron ore in Qingdao Port was reported at 1,040 yuan/ton, which was a drop of 300 yuan/ton from 1,340 yuan/ton, the highest in the year. The first half of this year will be the key point of the European sovereign debt crisis. There are many uncertainties in the direction of the global macro economy. It remains to be seen whether the global steel demand can be effectively released. The domestic market was constrained by demand and funds, and there was no obvious loosening of policy at the moment. The situation of tight capital in the real economy continued. In addition, the market is worried that the slowdown in the economic growth and the continuous regulation of the real estate market, so the long-term demand is not very optimistic.

Sea freight rates accelerated. Since the high point of 2161 points reached on October 20, 2011, the BDI index began to oscillate downward. Since 2012, this situation has intensified. At 680 points as of January 31, BDI accumulated a total of 944 points in the month, a decrease of 59%, the largest monthly decline since 2008. In addition to the severe market contraction caused by Asian holiday factors, most of the world's major economies are facing the risk of economic recession and the slowdown in the demand growth of bulk commodities such as iron ore, coal, and cereals. This undoubtedly makes the original capacity surplus. The international shipping market is once again worse. Iron ore trade is undoubtedly an important promoter of pushing up global shipping prices. As domestic stockpiles have accumulated, and iron ore demand in other regions of the world has been severely reduced, shipping prices will hardly pick up in the short term. At present, the BDI index is hovering around 1800, and it is expected that the depressed shipping market will not be able to improve in the short term. However, given the excess supply of ships, even if there is a rebound, it is expected that there will be no strong upward momentum.