Analysis on the Forecast of Iron Ore Price in China in 2013

In 2013, iron ore once again became the focus. After the price of iron ore exceeded US$150/ton, starting from 2012, disputes regarding the inflection point of iron ore prices have always existed. However, judging from the current situation, it is still difficult to see a price trend with an inflection point in 2013.

Iron ore price weakness began in December 2012, iron ore prices continued to rise, after the opening of the New Year's Day in 2013 it broke the 150 US dollars / dry ton mark. However, following the first single day of decline in the price of imported iron ore on January 17th, the price of imported ore began to decline this week, and the decline continued to increase, with the total number of varieties falling by RMB 60-70/t.

From the early advance of the domestic steel market prices, to the mid-market speculation "urbanization" is expected, to the late restocking of steel mills, the current round of iron ore price increases "first false after the real", the three factors are superimposed with driving The main driver of price increases.

However, as the iron ore prices continue to rise, the market has become more and more observant. According to reports, iron ore spot trading platform took the initiative to lower prices to find transactions, but the buying and selling atmosphere was strong, while the steel industry was watching and the atmosphere was strong, and the iron ore turnover was weak.

The market expects that iron ore prices will continue to fall in the short term. Affected by falling prices of iron ore and falling billet prices, the steel market tends to weaken. From the ** market situation point of view, the spot price spread 272 yuan / ton, due to the lack of effective demand for spot market support, ** market prices remain at 4,000 yuan / ton to continue to oscillate.

Liu Xintian, chief analyst of the business community, believes that the early price increase of iron ore has not been able to get the support of the spot price of steel, which indicates that the lack of downstream support for iron ore prices will inevitably lead to a correction.

Three-factor speculation of iron ore prices is difficult to maintain analysis of this round of iron ore price increases, the overall point of view, mainly three major factors: First of all, structural problems are long-standing problems in China's steel industry, and in the iron ore field Within the year, since the annual agreement price was changed to index pricing, the market has become more flexible and the trade structure has changed. Especially small and medium-sized steel companies and traders have joined the ranks of imported ore procurement, which makes market buyers lack cohesion and further increase their bargaining power. Delivered to the seller.

At present, there has been a structural change in the iron ore inventories at the port, which has changed from an inventory structure in which steel mills accounted for 40% of the total number of traders in the past to 40% for steel mills and 60% for traders. On the one hand, the steel mills were affected by the domestic market, adopted a short-term inventory strategy, and increased temporary purchases on the domestic spot market; on the other hand, more traders participated in the import market in the spot iron ore market. , Traders have adopted a “smoothing” sales strategy for advanced remarketing.

This structural change has caused traders to sell at high prices, and short-term inventory policies of steel companies will rely more on temporary purchases from the spot market. Iron ore prices may only rise and must not decline.

Second, excessive speculation about "urbanization" is expected. With the Central Economic Work Conference clearly proposing urbanization as one of the economic priorities in the future, the concept of urbanization has become a hot topic of speculation in the iron ore market. Affected by the urbanization, steel prices rose slightly, while the iron ore gains were far greater than the increase in steel prices.

An industry source pointed out that the concept of "urbanization" has been severely overdrawn by iron ore enterprises. "Foreigners are more concerned with us than urbanization."

Although urbanization will push steel demand and thus increase iron ore demand, this is a long process and may even be an economic engine in the next decade. The possibility of increasing market demand in the short term is minimal.

Third, the gradual increase of funds has caused the market to increase imports. Especially under the influence of quantitative easing policies implemented by major international currencies, there are funds behind the rise in the price of imported iron ore. In the domestic market, there was a loosening of funds at the end of the year, which increased the purchasing power of steel companies and trading companies, and eventually turned into a real complement.

In particular, traders have become increasingly reluctant to sell at the same time as their funds have gradually widened. At the same time, they have increased imports. This situation has led to light trading in the market and priceless markets. There are even large traders who directly increase their quotation.

After the sharp decline in iron ore during the middle of 2012, the domestic market witnessed an “inflection point” in iron ore prices. However, with the recent sharp rise of six months, the inflection point has been questioned. In reality, it is an indisputable fact that the Chinese steel industry's demand is gradually stable. However, from the balance of supply and demand in the international iron ore market, the price of iron ore in 2013 is still a wide fluctuation market, and its core is still downstream. The degree to which steel demand can pick up is hard to see the expected turning point or the overall decline.

First of all, investment budgets have increased in all parts of the country in 2013, and investment budgets have reached 100 billion yuan in many places. This makes the demand for steel in 2013 higher than in 2012, and the overall demand for imported iron ore will increase. Regardless of how these budgets are implemented, the concept of urbanization will take the first step in 2013.

Second, on the supply side, although the long-term view of iron ore oversupply situation is difficult to change, but in the short term, the support of overseas small and medium-sized independent mines and our overseas overseas interests and mines is still difficult to change the three major ore companies monopolize the supply of imported iron ore to China. situation. After suffering dilapidation of assets, whether Rio Tinto or Vale has obtained more funds to support the existing iron ore projects, its supply increase will intensify the squeeze of small and medium-sized independent mines, and further seek to expand the impact on the Chinese market. force.

Third, the new pricing mechanism has not yet been formed. The tender price is still the market baton, which means that the pricing initiative is still in the hands of others. Although index pricing is a nominally dominant pricing mechanism, the actual initiative is still in the hands of others, not the full market pricing.

Fourth, the demand competition in the international market is increasing. In 2012, the rapid development of the Indian steel industry has become the world’s fourth largest steel producer and has become a net importer in the iron ore sector. According to sources, the Central Government of India has formulated a development plan to increase investment in the domestic steel industry in the next few years, which will allow the domestic steel industry to at least double. India is also a populous country, its demand for industrialization and urbanization has just begun, demand for steel is showing a trend of accelerated growth, so it can be expected that India will become the next largest importer of iron ore.

On the whole, China's steel demand will enter a normal stable state, but the structural adjustment within the steel industry is arduous. The lack of industrial cohesion and a series of problems caused by it will continue to plague the development of the Chinese steel industry in the short term. The economic externality is that it is difficult to form a joint force in the iron ore field and it is difficult to enhance the market bargaining power. Scattered, chaotic, and small iron ore import patterns are difficult to change in the short term, so it is difficult to see the iconic inflection point during the year.