Steel prices soared and compressed downstream profits are expected 2012 supply and demand will turn point

Global excess liquidity and high domestic CPI innovation. The price of iron ore as a “grain” for steel has also been climbing all the way up. The price of imported iron ore in October has approached the level before the financial crisis. There is widespread concern in the industry that this will increase the cost of downstream building materials, automobiles, shipbuilding, machinery manufacturing and other industries. It is expected that the supply and demand in the iron ore market will see an inflection point in 2012-2013 and supply is expected to exceed demand.

The price of imported iron ore has skyrocketed. Statistics from steel companies show that although the amount of imported iron ore in China fell in the second half of 2010, the average price of imports has skyrocketed. The average import price in October 2010 has reached US$ 146. t, almost equal to the level of ore price before the financial crisis in August 2008 of USD 154/t.

Lange Research Center Zhang Lin analyzed the author. In this round of rising CPI, the Fed's “quantitative easing” caused the excess liquidity incentives to be greater than the impact of natural disasters leading to food production cuts. Global energy and raw material prices will likely rise further.

She said that the average price of imported ore has skyrocketed for two reasons: One reason is related to the decline in the proportion of imported low-grade ore; another reason is that the free flow of international hot money is the main source, but also caused the current rise and fall of China's commodity market is frequent The important reason for the fluctuation. In the future, we must be wary of future opportunities for imported iron ore prices to rise in the trend of international commodity prices, exceeding the price level before the financial crisis.

The increase in ore prices has escalated the flow of international hot money in the downstream industries, which has forced us to be alert to the risk of iron ore price increases in the future, and to further increase the cost burden on already low profit margin steel production enterprises. Zhang Lin described the author's view of the steel industry chain: The sharp rise in international iron ore prices, the rise in the cost of China's steel companies, major steel mills have successively raised the prices of various types of steel products, so that the downstream construction steel, The cost of building materials, automobiles, shipbuilding, machinery manufacturing and other industries rose. Due to the differences in cost transmission capabilities, the profits of related companies have declined.

The relevant purchasers of Shandong Laiwu Yongfeng Iron and Steel Co., Ltd. told the author that the continued increase in the price of imported iron ore made the domestic importer's risk awareness increased and the purchase volume slowed down. The current iron ore quotations and spot prices have been higher than the four-quarter ore price agreed by the three major mines. Before the end of the year, the iron ore procurement plan was not available until the end of the year.

An insider of China Minmetals Group stated to the author that according to the current development plans for major iron ore projects, it is expected that supply and demand in the iron ore market will be inflection point in 2012-2013, and supply is expected to exceed demand. As iron ore prices have been rising year after year, attracting a large amount of capital to enter this industry, a large number of projects for expansion and new construction will soon be released. First, the large-scale expansion of existing mines such as Rio Tinto, and secondly, China’s state-owned enterprises have also stepped up overseas investment in recent years. When iron and steel enterprises' foreign interests and mines start to flow to the domestic market, the supply and demand structure of iron ore will also change.



Information