Multiple factors affect China’s iron ore import prices to fall significantly in November

China's iron ore import prices dropped significantly in November due to multiple factors such as the continued decline in domestic crude steel output, weak demand, and steady growth in global iron ore output.

In the evening of today (December 15), the reporter of the “Daily Economic News” learned from the customs that statistical data show that since the beginning of this year, the scale of iron ore imports in China has been stable at a relatively high level, with only a short period of sharp fall in October. The month-on-month rate dropped by 17.5%, but it quickly rebounded. In November, the import volume was 64,200,000 tons, a significant increase of 28.6% from the previous month; meanwhile, the import price of iron ore ended the previous period of four months, maintaining US$170 per ton for four consecutive months. At the above high prices, import prices in November fell to US$162.1 per ton, a decrease of 7.6% from the previous period, and the decline was significantly higher than the previous month.

Demand is weak

Why does the import price fall significantly in November?

In November, domestic crude steel production continued to fall and demand was weak. According to the statistics of China Iron and Steel Association on November 28, the average daily crude steel output of key enterprises in the country in mid-November was 1.484 million tons, a decrease of 1.4% from the previous month. The average daily crude steel output of the country is estimated to be 1.637 million tons, which is significantly lower than 10 With an average daily output of 2.1 million tons per month, the output was new low during the year, and the demand for domestic steel products was significantly reduced. At the same time, due to the European debt crisis, important European steel mills have announced production cuts. At the end of October, ArcelorMittal shut down some blast furnaces and electric furnaces in Europe. ThyssenKrupp announced that it will cut its share in Europe in the fourth quarter. The steel output is 500,000 tons.

In addition, the steady growth of global iron ore output is an important reason for the significant drop in the import price of iron ore in China in November. In 2011, the global mining investment boom triggered by the financial crisis began to enter the production period. The release of new production capacity led to a significant increase in iron ore output. In addition to Rio Tinto, the output of iron ore sands has hit a record high in the four major mines. In the third quarter of this year, the four major mines produced 177 million tons of iron ore, an increase of 11.2% year-on-year and an increase of 9.6% from the previous month, of which the output of the Vale was 87.9 million tons, an increase of 10% year-on-year and an increase of 13.5% from the previous month; Rio Tinto was 49.83 million tons. , an increase of 4.7% year-on-year, an increase of 2% from the previous month, which is second only to the historical high of 50.5 million tons in the fourth quarter of 2010; in addition, BHP Billiton production was 39.57 million tons, an increase of 23.7% year-on-year, an increase of 11.4%; FMG was 1584 Ten thousand tons, a substantial increase of 62.5% year-on-year, an increase of 27.7%.

It is worth noting that the downstream industries are generally weak and it is difficult to drive steel demand. The data released by the Ministry of Industry and Information Technology on November 14 shows that in September, China’s shipbuilding industry only accepted ship orders of 940,000 dwt, which is the lowest monthly value since June 2009, and the demand for steel in the shipbuilding industry has decreased; at the same time, the domestic real estate regulation has seen for the first time. According to the latest data from the central bank, according to the latest data from the central bank, the growth rate of mortgages declined significantly in the first three quarters of this year, and the real estate index increased by RMB 743.9 billion year-on-year. The sluggish demand for real estate also led to the demand for steel products. Not only that, but because of the railways* * Difficulties. The current shutdown project has reached more than 90% of the railway projects under construction and has also affected the demand for domestic steel products.

Pricing mechanism closer to spot trading

Statistics show that, due to the recent sluggish demand for iron ore and the reversal of market supply and demand, spot ore prices have fallen sharply. BHP Billiton has actively lowered the price of iron ore, and Vale is forced to follow the price cuts. The fourth quarter quotation is lowered from US$175 per ton. To $160, the executive director of its iron ore department said that it is negotiating with Chinese customers one by one, and it is possible to adopt measures based on the actual average price to replace the quarterly pricing model adopted since April 2010.

The meager profits of steel companies also deserve attention. According to the latest statistics from China Iron and Steel Association, 25 out of 77 large and medium-sized steel enterprises suffered losses in October. The industry’s sales profit margin was only 0.47%, and the profit was only 1.375 billion yuan, a decrease of 82.6% from the previous month. Most steel companies were under the cost line. Loss of business.

Foreign miners’ shipping control strengthened

It is reported that foreign miners will strengthen their shipping control and their pricing power will be further strengthened. Vale recently announced that it will launch an iron ore transshipment center in Subic Bay, Central Philippines. This move is intended to control the shipping market and reduce the cost of iron ore transportation on the Brazilian-Chinese iron ore route. The shipping company will have a huge impact. Since 2008, the three giants have continued to increase the scale of their own fleets, particularly in Vale. Last year, a total of 9.3 billion U.S. dollars was invested in the self-owned fleet constructed by Vale. Currently, there are 22 vessels in existing capacity in Vale. , Nearly 5 million DWT, plus capacity controlled by purchase, new construction, and leasing, will control 80, 25 million DWT dry bulk shipping capacity and orders as of 2013, including nearly 40 400,000 tons The ore-laden ships, which will seriously weaken the market competitiveness of existing shipping companies' existing 230,000-ton and 300-ton-ton ore carriers.

To this end, the Customs recommended: First, continue to strengthen the monitoring of iron ore sand import price movements, timely release warning information, guide enterprises to reasonably grasp the pace of imports; Second, encourage enterprises to establish overseas iron ore sand multi-channel supply base, expand emerging import sources The third is to timely assess the impact of domestic iron ore price index, strive to increase the influence of domestic index in the international market, and strive for China's discourse power and pricing power in the iron ore market; Guide the merger and reorganization of domestic iron and steel companies, strengthen the monitoring and evaluation of steel companies' environmental protection indicators, and build green steel enterprises.