Imported iron ore prices fell into the focus of weak iron and steel power

The real market supply and demand seem to be "conditioning" the "virtual fire" of the Chinese steel industry. According to the latest data released by China Customs, China’s import of iron ore fell by nearly 30% in February, and the price of imported ore fell by nearly 10% in just a few weeks.

The ore price has entered the downward channel with the “three-way synchronization” of the ex-factory price of Chinese steel mills and the steel price of the domestic spot market. China's most representative steel mill Baosteel Group official said that the high-speed growth momentum of the Chinese steel industry has been weakened for many years and it is bound to find new “power sources” in structural adjustment.

In January of this year, China's iron ore import volume hit a record high "surprisingly". At that time, some market participants made an "in-depth interpretation" and believed that China's steel market outlook is expected to be more optimistic. However, the latest data released by China Customs quickly changed these views. In February of this year, China imported 48.64 million tons of iron ore, a decrease of 29.44% from the previous month and a year-on-year decrease of 1.5%.

What is more noteworthy is that the current performance of China's imported mines is "the volume and price drop." According to the monitoring of the Xipan Shinkansen, a representative steel spot trading platform in China, spot iron ore mines in China's ports have continued to operate weakly, and the price of foreign minerals has declined. The spot price of 63.5% grade Indian fines has been nearly 200 per ton since the Spring Festival. The dollar dropped sharply to 179 dollars, a decrease of nearly 10%. However, the demand for terminals still has no improvement. Some small businesses have reflected that the ore resources that are on hand are still unable to drive the willingness of the steel mills to purchase, even if the price drops significantly. “The overall turnover is poor.” The prices of domestically produced iron concentrate powder are also falling sharply, and steel mills are not actively sourcing, “frequently suppressing market quotes”.

Not only the price of ore, the steel prices of steel mills in China and the market price of the spot steel market are all “falling simultaneously”. According to the latest market report released by the Ministry of Commerce of the People's Republic of China, domestic steel prices have been falling for the second consecutive week, and the decline is widening until early March. It is expected that steel prices will still have a slight decline in the short term.

Sheng Zhicheng, director of information on the “Xiben Shinkansen”, told the author that after the Spring Festival, the Xibong Index, represented by construction steel, has been lowered from the highest price of 4,910 yuan per ton to the current 4,650 yuan, a decrease of 260 yuan. Chinese steel mills are in the process of lowering their full-scale prices. Shagang, a representative steel company in the field of construction steel, has lowered its ex-factory price by 300 yuan per ton in mid-March, and subsidized 200 to 300 yuan per ton for pre-contracts. "Sluggish contract organization is the main reason for the overall price reduction of steel mills." Some people estimate that compared with the current price of raw materials and market prices, the production of some steel mills is basically unprofitable. “If the market prices continue to fall, many steel mills will fall into losses.”

According to the author's understanding of the steel market in the meantime, the continued lack of demand for steel terminals after the Spring Festival is a “direct reason” for the changes in the steel market. In Shanghai's construction steel market, terminal purchases are basically aimed at relatively low-priced resources, "on-demand procurement," and the middle handcuffs trade, which used to occupy a considerable portion of the "shares," is in a state of wait-and-see stagnation. The real supply and demand began to regulate the operation of the steel market.

However, the inertia of "virtual fire" in the Chinese steel industry remains strong. According to the latest statistics from the National Bureau of Statistics, China's crude steel production reached 5.431 million tons in February, an increase of 9.7% year-on-year, and the average daily output was 1.939 million tons, a record high. Relevant analysts believe that the steel production is “inappropriate” rebound, which has greatly increased the market supply pressure.

The leading company in the Chinese steel industry still maintains a clear head. Xu Lejiang, chairman of Baosteel Group, told the author that the high-speed growth that China's steel industry has been maintaining for many years has already ended. Under the background of China's economic transformation and upgrading, the growth of China's steel demand has slowed down, and the pressure of rising industry operating costs has become more prominent. The industry will enter the era of low profit and enter the development stage of low carbonization. From the perspective of development trends, the influence of basic production factors in the competitiveness structure of the steel industry will tend to decline, and the impact of high-level production factors such as innovative R&D and soft power will increase.

Luo Tiejun, deputy director of the Department of Raw Materials of the Ministry of Industry and Information Technology, also believes that the steel industry is not faced with short-term market adjustment, but a “transformation and development period”, and overall planning is very important and cannot be discussed on the matter. Many people in the industry believe that the Chinese steel industry will once again face the “two-headed squeeze” of upstream high-cost raw materials and poor downstream demand this year. What's more, this “two squeezed” state may be a long-term rather than short-term feature that “forces Chinese steel mills to fully enter the adjustment period.”

Representative steel companies such as Baosteel have been laid out in advance. The author learned from Baosteel that its new round of development plan has established a capacity building system in five areas including “leading technology, service first, digital Baosteel, environmental management, and integration of industry and finance”. According to related persons, companies in many industries are now more and more similar. Mimicking means fierce homogenous competition and it is difficult to have winners. The more companies use benchmarking and benchmarking, the more similar they are. The Chinese steel industry has also seen this trend. Therefore, Baosteel must answer “how it is different from others”, especially the iron and steel industry. The purpose of Baosteel's capacity building system is to form a core capability that is “different from others” and to shape new competitive advantages.