In 2022, the price of iron ore has been rising, from $110 / ton in January to $145 / ton in early May, an increase of about 30%. If calculated from US $98 / ton in November 2021, the high US $162 / ton by March 2022 will increase by about 80%, and the iron ore price has achieved a "steady rise" in the first quarter.
According to the analysis of experts from Lange Iron and Steel Research Center, the rise in the early stage, especially the rise to the high point in March, is obviously caused by market speculation, the reduction of international production due to the impact of Rainstorm in Brazil and hurricane in Australia, and the reduction of some iron ore supply under the conflict between Russia and Ukraine, resulting in the rise of international commodities.
Causes of the epidemic: imbalance between domestic supply and demand
The price rise of iron ore in 2022 is related to the tight epidemic situation and poor freight circulation in March. It is understood that after the Spring Festival holiday, the national iron and steel enterprises need to replenish a large amount of ore to replenish their inventory. At this time, there is an epidemic in many regions of the country, especially in the northern region of the main iron ore producing area. The closure of many cities leads to the poor freight circulation, the steel enterprises are unable to recover the large amount of inventory previously consumed, and some enterprises have the phenomenon of "living beyond their means". According to Mysteel research, on March 24, there were seven blast furnace stewing furnaces in Tangshan, affecting the daily average hot metal output of 29500 tons / day.
In addition, at the downstream product end, due to the high operating rate in spring, the demand for steel suddenly increased. According to the data published by Shenwan Hongyuan Research Institute, the GDP growth rate in 2022 is about 5.5%. Under the neutral situation, the infrastructure investment is expected to increase by 7.05%, corresponding to the annual steel consumption in the infrastructure field of 188 million tons, a year-on-year increase of 11.23 million tons, an increase of 6.35%. Affected by this, since the end of December 2021, the price of deformed steel bar has increased from 4760 / ton to 5085 yuan / ton, an increase of 6.8%.
Insufficient overseas construction has led to the rise of international iron ore prices
Domestic supply and demand side and other reasons led to the rise of iron ore prices in the first quarter. The reduction of foreign iron ore production due to weather and the reduction of port maintenance shipments also provided a driving force for the rise of prices.
It is understood that the output and shipment volume of mining companies from overseas in the first quarter are lower than those in 2021. From the perspective of global shipments, shipments in the first quarter of 2022 were significantly weaker year-on-year, with a decline of more than 20 million tons compared with the same period in 2021. On the production side, affected by the rainfall in Brazil, the port maintenance in Australia, the stagnation of local production caused by the conflict between Russia and Ukraine and other factors, the international shipment volume fell.
In the first quarter of 2022, the output of the three major international mining companies showed a year-on-year decline. Among them, the amount of iron ore powder in vale was 63.9 million tons, a year-on-year decrease of 4.1 million tons; Rio Tinto's Pilbara iron ore output was 71.7 million tons, down 6% from the first quarter of 2021; BHP Billiton's output was 66.67 million tons, unchanged year-on-year and decreased by 10% month on month.
In terms of the conflict between Russia and Ukraine, the shipment of iron ore between the two countries was only about one million tons in March, while it reached 15 million tons in the same period in 2021.
The price may be more stable in the second half of the year
Some market participants believe that the current iron ore price is high. However, with China's more scientific and accurate epidemic prevention measures against Omicron virus, the epidemic has been effectively controlled except Shanghai since March, and the control measures in many places are being lifted, and the shortage of raw materials caused by the epidemic has been alleviated.
On April 20, the national development and Reform Commission announced that the crude steel output reduction policy will continue to be implemented in 2022, realizing a year-on-year decline in output. It can be seen that this limits the rebound height of molten iron production in the later stage, which is not conducive to the continued release of ore replenishment demand in the later stage.
The data show that at present, the year-on-year decline of crude steel output in the first quarter has reached 27.67 million tons. Affected by the epidemic in the second quarter, the steel output is unlikely to exceed the first quarter under the influence of low demand. Therefore, the demand side is weakened, which is not conducive to the rise of iron ore prices.
In addition, iron ore belongs to bulk commodities and is also the main raw material of the iron and steel industry. According to the national goal of "stabilizing prices and growth", the state will continue to introduce policies to regulate and stabilize iron ore prices.
At present, the production of the three major mining enterprises in the foreign market continues to recover. Since February and March, this part of the gap caused by the suspension of production due to the conflict between Russia and Ukraine is also being made up by other mines.
Industry insiders believe that, on the whole, the price of iron ore may be more stable in the second half of the year.
