The short-term prospects of iron ore producers such as Brazil’s Vale’s are “challenging†due to the slowdown in Chinese iron ore imports.
Barclays Latin American analysts headed by Leonardo Correa and Renato Antunes said that because Chinese steel mills are digesting iron ore stocks in backlogged ports, and the government has asked some steel mills to cut capacity to meet national energy-saving emission reduction targets, China’s iron ore Stone demand is slowing. Analysts also said that, but in the medium to long term, iron ore demand is still strong.
According to statistics released by the General Administration of Customs of China, China imported 44.60 million tons of iron ore in August, which was a decrease of 10.2% and 13% year-on-year, respectively. Although China's overall economy still maintained a high growth rate, iron ore imports from January to August only slightly increased by 0.1% from the same period last year to 405 million tons.
According to data from January to July this year, China imported 360 million tons of iron ore, an increase of 5.25 million tons, an increase of 1.48%, and an increase of imports by 30.28 percentage points from the same period of last year. Since the second quarter, China’s imports of iron ore have been continuous. During the month, iron ore imports fell by 2.94% year-on-year in April, 2.92% in May, 14.72% in June, and 11.71% in July.
Analysts said that in order to meet the energy saving targets during the “Eleventh Five-Year Plan†period, the Chinese government has restricted the power of some steel mills, and it is expected that the operating rate of steel mills will decline in the next few weeks or months. It is expected that the Chinese government will continue to use new production facilities to eliminate backward and inefficient steel production capacity.
The contract price of iron ore given to Chinese steel mills by Vale, BHP Billiton Ltd. (BHP) and Rio Tinto Ltd. in the fourth quarter may decline by 10%-13% from the third quarter. The contract price in the fourth quarter was calculated based on the average price of China's iron ore spot market during the period of 6-8 months, and the spot price in June-August has decreased compared with the previous three months.
Barclays said that in the medium and long term, changes in demand will have less impact on Vale than other global iron ore producers, as the average iron content of iron ore reaches 65%-66%, which is higher than BHP Billiton and Rio Tinto. 2%-3%.
Coal prices may be affected
Some industry analysts believe that the profit recovery of high-energy downstream industries such as cement and steel will mean that coal prices will become more affordable, which in turn will lead to higher coal prices.
However, some experts pointed out that due to the current supply and demand balance of coal, coal prices will not soar.
Judging from the actual market conditions, affected by the improvement of the downstream steel and coke market, coupled with the tight supply of coking coal resources, according to the reporter, the price of coking coal in some areas such as Shanxi Linfen has increased by RMB 20-50/ton.
“Under the drive of downstream industries, the recent increase in coking coal prices and the coal industry may indeed usher in an overall increase in prices, but this will not be significant.†Hao Xiangbin, Director of Marketing, China Coal Transportation and Marketing Association interviewed the media. Said.
He told reporters that according to the relationship between supply and demand of coal, this year the coal industry will show a “balance, stability, and flat†“three levels†trend.
In this regard, the BOCI International Analyst Report pointed out that although Shanxi's coking coal pit prices rose 1%-2% on a week-on-week basis, “there is no sign that the price of coking coal has risen sharply. It is expected that there will be steady growth in the future.†It is pointed out that in the process of gradual disappearance of seasonal factors, the price of thermal coal may still decline, but there is little room for decline.
Market demand or heavy increase
As steel prices rise, the costs of downstream industries such as automobiles, home appliances and real estate increase.
Taking the real estate industry as an example, steel is one of the three major building materials. According to insiders, the proportion of steel costs in housing prices, multi-storey residential buildings accounted for 19% of the building price, and small high-rise residential buildings accounted for every square meter. At 21% of the price, if we increase the price increase of steel-related materials and equipment, the cost will increase by about 5%. "As steel prices rise, the cost of real estate development naturally rises. If the price of steel rises by 600 yuan per ton, the cost of building a house will increase by about 200 yuan." The person in charge of a construction site told reporters that if steel prices continue to rise, it will give The construction industry and the real estate industry have brought about no small cost pressures, which may drive up house prices, and do not rule out the possibility that the prices will be “mother-to-childâ€.
In fact, the price of steel will affect the price trend of real estate, and the demand for steel depends to a large extent on the direction of the real estate market. Starting in mid-April this year, in order to curb high housing prices, the government has successively controlled the property market. Over a period of time, the property market is struggling to stagnate the stagnation. In June of this year, prices showed a downward trend at the beginning of the year. In July, they again stood still. By August, the property prices in some cities showed a pick-up trend.
Analysts believe that steel and cement are the upstream industries of real estate. The rise in the price of steel cement will inevitably affect the cost of real estate. From another perspective, it is now the peak season for the sales of “Jinjiuyinshi†in the property market. The demand for steel and cement will further increase. From the perspective of supply and demand alone, it seems inevitable that domestic steel prices will continue to rise.