In the past two weeks, the international iron ore price has rebounded strongly. The price of 62% iron ore has risen from the recent three-year low of US$86.7 per tonne seen on September 5 to nearly US$110, representing an increase of approximately 27%. Mainly due to the recent increase in steel prices and spot prices, driven by steel mills and traders to add inventory, coupled with QE3 favorable factors, but also contributed to the rise in iron ore prices.
The National Development and Reform Commission earlier approved 1 trillion yuan in infrastructure projects, so that the market will boost demand for steel. In addition, in order to maintain social stability and taxation, some local governments recently demanded that iron and steel enterprises in their jurisdictions must not reduce their production before the end of the quake, and they also provide support for iron ore prices.
However, the capital investment of 1 trillion yuan is expected to only drive about 6-7 million tons of steel demand, and this year the national crude steel production is expected to reach a record high of 722 million tons, an increase of 5.2% over 2011, steel The problem of overcapacity in the industry is still serious. On the other hand, although the inventory of iron ore in the country’s 30 major ports has recently declined, it still reached 96 million tons. Therefore, the sharp rebound in international iron ore prices may be purely speculation instead of reflecting the real recovery of demand.
The National Development and Reform Commission earlier approved 1 trillion yuan in infrastructure projects, so that the market will boost demand for steel. In addition, in order to maintain social stability and taxation, some local governments recently demanded that iron and steel enterprises in their jurisdictions must not reduce their production before the end of the quake, and they also provide support for iron ore prices.
However, the capital investment of 1 trillion yuan is expected to only drive about 6-7 million tons of steel demand, and this year the national crude steel production is expected to reach a record high of 722 million tons, an increase of 5.2% over 2011, steel The problem of overcapacity in the industry is still serious. On the other hand, although the inventory of iron ore in the country’s 30 major ports has recently declined, it still reached 96 million tons. Therefore, the sharp rebound in international iron ore prices may be purely speculation instead of reflecting the real recovery of demand.
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