Iron ore prices may fluctuate down in early 2022

In 2021, iron ore prices will be ups and downs, and the price fluctuations will exceed the expectations of many operators. Industry insiders said that the turbulent operation of the iron ore market may become a norm.

The iron ore market will fluctuate in 2021

At the beginning of 2021, during the New Year’s Day and Spring Festival, most steel companies replenished iron ore resources, the demand for iron ore was released, and the price continued to rise. At the end of the first quarter, under the pressure of strong production restrictions in Tangshan, iron ore prices fluctuated and fell. On March 25, the price of 65% imported iron ore was $192.37/ton, down $6.28/ton from the previous weekend.

In the second quarter, the increase in production of steel companies outside Tangshan made up for the output gap in Tangshan, and the output of pig iron increased more than expected. Especially after May 1, the market prices of black varieties rose rapidly, and the prices of many varieties broke record highs one after another. 62 % The forward spot price of imported iron ore rose to the highest point of 233.7 US dollars / ton. After that, through policy regulation, the market price of black varieties fell significantly, and the market price of iron ore gradually fluctuated and fell. On May 8, the price of domestic iron fine powder was 1450 yuan/ton; on May 14, it rose to 1570 yuan/ton; on May 28, it fell back to 1450 yuan/ton.

In the third quarter, affected by the increase in steel prices and the structural changes in inventory, the operating rate of blast furnaces in steel mills increased, the market demand for iron ore was released, and prices fluctuated at high levels and rose slightly. As of August 27, the price of 61.5% PB powder in Qingdao Port was 1,040 yuan/ton, an increase of 25 yuan/ton from the previous week.

However, with the intensification of production restrictions and production reductions by steel mills, pig iron production has declined rapidly, iron ore demand has shrunk, and prices have fallen rapidly. As of September 10, the price of 61.5% PB powder in Qingdao Port was 970 yuan/ton, down 50 yuan/ton from the previous week. After that, the price of 61% PB powder in Qingdao Port fell all the way to around 500 yuan / ton, and gradually entered the bottom-seeking stage.

Entering the fourth quarter, the iron ore market was sluggish and sluggish, with shrinking demand and flat transactions. The price fluctuated again, falling before rising and then rising. Taking 62% imported iron ore as an example, on August 27, its price was 1,040 yuan/ton; on September 24, it was 746 yuan/ton. In October, iron ore market prices rose first and then fell. On October 5, the price of 62% imported iron ore rebounded to 876 yuan/ton, rebounding by 130 yuan/ton; on October 29, it fell back to 806 yuan/ton, down 70 yuan/ton.

In November, the iron ore market price also fell first and then rose, with the decline outweighing the rise. On November 5, 62% of imported iron ore was quoted at RMB 697/ton, down by RMB 109/ton; on November 26, the offer stopped falling and rebounded, rising to RMB 640/ton, up RMB 74/ton. At the end of November, the price of 62% imported iron ore fell by 630 yuan/ton compared with the end of August.

The iron ore market price in December showed a rebounding trend. On December 2, 62% of imported iron ore was quoted at 666 yuan/ton, up 26 yuan/ton; on December 10, the price was 700 yuan/ton, up 34 yuan/ton; on December 17, the price was 755 yuan/ton , up 55 yuan / ton. During the week from December 13 to December 17, the price of iron fine powder in major domestic areas generally rose by 30-80 yuan/ton.

It can be seen from the price trajectory of the iron ore market in the fourth quarter that in October and November, the iron ore market price was in a volatile downward channel, and the decline was stronger than the rise. However, the iron ore market price in December stopped falling and rebounded, and the increase was not small, entering the upward channel again. In this regard, industry analysts believe that: First, the expected resumption of production by steel mills is the core driving force for this round of iron ore price rebound. According to statistics, the average daily output of crude steel and pig iron by member companies of the China Iron and Steel Association that participated in the statistics in early December was 1.9343 million tons and 1.6418 million tons, an increase of 12.66% and 0.59% month-on-month. Second, it was affected by the rebound in the futures market. Since late November, iron ore futures prices have rebounded significantly, with the largest increase of more than 20%. Affected by this, the market price of iron ore spot supply continued to recover. The third is artificial speculation. Under the circumstance of low demand, high inventory, and prominent contradiction between supply and demand, the price of iron ore has risen sharply without support, and artificial speculation cannot be ruled out.

Iron ore prices may fluctuate down in early 2022

Operators and industry insiders generally believe that at the beginning of 2022, the pattern of “strong supply and weak demand” in the iron ore market will not change, which determines that the price of the iron ore market is easy to fall and difficult to rise, and fluctuates downward. A research institution said: “It is expected that the iron ore price center will drop in 2022.”

In the interview, operators and industry insiders said that there are three reasons behind the “strong supply and weak demand” in early 2022.

First, it is still in the heating season from January to mid-March 2022, and the iron and steel industry in the Beijing-Tianjin-Hebei region and surrounding areas will shift production during the heating season from 2021 to 2022. In principle, from January 1 to March 15, 2022, the proportion of off-peak production of iron and steel enterprises in all relevant regions shall not be less than 30%.

Second, in early 2022, some steel mills will still be in a state of maintenance shutdown, which will affect the release of production capacity. According to incomplete statistics, at present, there are about 220 blast furnaces under maintenance in the national steel industry, affecting the average daily production of molten iron of about 663,700 tons, which is the stage that has affected the most molten iron production in the past three years.

The third is to optimize the structure of the iron and steel industry and actively promote the high-quality development of iron and steel enterprises. In the process of capacity replacement, steel companies reduced the production of long-term steelmaking, and the demand for iron ore continued to shrink. Under the background of “carbon peaking” and “carbon neutrality”, the “Carbon Peaking Action Plan before 2030″ issued by the State Council clarifies that it will promote the structural optimization of the steel industry, vigorously promote the demonstration of non-blast furnace ironmaking bases, and implement all-scrap electric furnaces. craft. In addition, the “Opinions of the Central Committee of the Communist Party of China and the State Council on Deepening the Battle of Pollution Prevention and Control” calls for promoting the transformation of blast furnace-converter long-process steelmaking to electric furnace short-process steelmaking.

It can be seen from the recently announced steel production capacity replacement plan that the new steelmaking capacity is around 30 million tons, of which the electric furnace steelmaking capacity exceeds 15 million tons, accounting for more than 50%, which means that more companies choose the short-process steelmaking process . Undoubtedly, the construction of carbon emission systems across the country and the introduction of the “carbon peak” action plan in 2030 will create conditions for iron and steel enterprises to use more scrap steel and less iron ore. In 2022, it is expected that the demand for iron ore by iron and steel enterprises will weaken again, and it is unlikely that the iron ore market price will rise significantly in the later period.

In the medium and long term, “carbon peaking” and “carbon neutrality” will still be negatively correlated factors for the release of production capacity in the steel industry, which will have a direct impact on iron ore demand. In short, the negative factors in the iron ore market have not disappeared, and there is no motivation to support its sharp rise in prices.

Experts pointed out that in the medium and long term, in the absence of obvious changes in the supply and demand of iron ore, there is no basis for the price of iron ore to rise sharply. The spot price of iron ore is relatively reasonable if it is in the range of US$80/ton to US$100/ton; if it exceeds US$100/ton, the fundamentals and demand are not supported; if it falls below US$80/ton, there may be some more. High-cost mines will withdraw from the market, balancing the market supply.

However, some industry insiders believe that in predicting the trend of the iron ore market in early 2022, it is also necessary to pay attention to the impact of the changes in the refined oil, fuel oil, thermal coal market and shipping market on the iron ore market price. In 2021, the global supply of oil, natural gas, refined oil, coal, electricity and other energy sources will be tight, inventories will be low, and prices will generally rise sharply, with an average year-on-year increase of more than 30%. All shipping costs are significantly higher. The gap in transportation capacity has increased, the supply and demand of ocean transportation has become tense, and freight rates have soared. According to relevant data, in 2021, the global dry bulk shipping price (BDI) will rise all the way, and once exceeded 5,600 points in October, an increase of three times compared with about 1,400 points in early 2021, hitting a new high in 13 years. In 2022, ocean freight rates are expected to remain high or even see new increases. On December 9, the Baltic Dry Index (BDI) closed at 3,343 points, up 228 points or 7.3% over the same period. On December 8, the coastal metal ore freight index closed at 1377.82 points. At present, seaborne prices continue to rebound, and it is expected that the BDI index will continue to fluctuate upwards in the short term.

Industry analysts believe that at least in early 2022, the global “energy shortage” will not be completely resolved. The high shipping price and the rise in overseas energy prices will have a certain impact on the iron ore market price. 

Post time: Jan-08-2022