Iron ore is currently considered a strategic commodity in the steel production chain. In recent months, we have seen a lot of demand in this area around the world. Along with this high demand, we have witnessed a decline in the level of iron ore extraction from mines discovered in the world. This alone can be a major threat to the international steel industry. In the following, we will examine the potentials of growth and decline in iron ore prices in the domestic and international markets. Please be with Artan Press.
*** Statistics of iron ore transactions in the commodity exchange
Yesterday, Sunday, June 23rd, 134,000 tons of iron ore concentrate and pellets were offered on the Commodity Exchange. The list of supplies, manufacturers, supply volumes and base prices show that the domestic commodity exchange is committed to transparency in the supply and demand system of the downstream steel chain. Yesterday, for the first time, the pellets produced by Gol Gohar Mining and Industrial Company were offered on the Commodity Exchange.
The base price of pellets of this company is set at 3550 Tomans per kilo. Pellets produced by Opal Parsian and Sirjan Iranian Steel will also be offered on the Commodity Exchange yesterday. Continuing this transparency could bring the price of iron ore in the domestic market into a competitive ring. But this alone cannot meet the growing needs of Iran’s industrial society. Alternatives should be considered for iron ore.
*** The growth of iron ore prices is affected by the growth of demand
Demand for iron ore is not only rising in Iran. According to international sources, in the coming months, steel will set new price records in its portfolio, mainly due to the volatility of iron ore prices. According to the Fitch Research Center, we should expect a 20% increase in steel prices in the coming months. The main reason for this can be summed up in the price of iron ore and the growth of its demand
This forecast is if the trend of increasing iron ore prices stops and the price of this industrial raw material remains at the current level. But if iron ore prices continue to rise, the upward trend in steel prices will accelerate. However, if iron ore prices fall in the future for a variety of reasons, it can be expected that steel prices will fall. But this analysis is a bit far from the current market reality.
Investigating China’s role in lower iron ore prices
From mid-March 2021, the trend of increasing prices of steel products, especially flat products, as well as iron ore and other raw materials of the steel industry accelerated. Exactly the world price level of ingots rose from $ 450 to about $ 800, and this trend became operational in China up to nearly $ 900 per ton. This issue continued until the Chinese government’s supervisory commission warned Tangshan and Shanghai steelmakers not to increase again with a clear order.
This put a brake on the growth of steel prices and iron ore prices. Following this move, a cautious atmosphere overshadowed sales, and iron ore, which had reached a record $ 240 per tonne, is now near $ 200 per tonne. This price drop is also noticeable in the long run.
*** The role of development budgets in controlling iron ore prices
But why in the Chinese market the prices of iron ore and other steel products have experienced a downward trend, at least to date? The answer must be summed up in China’s key role. First, the projected budgets for development projects in China, with the rapid growth of steel prices, which has been a major factor in the rise in construction prices, have largely needed to be revised, and the main reason for the government’s involvement in this process. China started pricing policy from iron ore prices to radically reform its entire steel chain. In line with its development goals, China can not tolerate this rise in prices in the steel sector.
*** China’s unconventional steel exports
Another issue that has suppressed iron ore prices is that China consumes about 95% of the steel produced in China, despite producing nearly 1 billion tons of steel, which is 60% of world production. Chinese steel exports are not high due to non-competitive prices. Rising prices due to the trend of imports of iron ore, intermediate products and other raw materials will cause a large outflow of currency from this country. Therefore, China’s commercial iron ore price should be maintained by controlling the price.
The main reason for this is the entry of political issues, especially the increase in steel and raw material prices of countries such as Australia, which are politically divided with China and the Chinese need products imported from such countries, especially iron ore and coal, in a higher position for the chin. Puts a woman.
*** China’s housing policy and falling iron ore price
But the reasons described above are not the most important reasons for China to suppress iron ore prices. The main reason for the Chinese government’s entry is the impact of steel on housing prices and other related sectors, and the government’s plans for public investment in housing and commercial buildings. Has slowed down. Therefore, production barriers in the industrial sector of this country should be controlled by creating mandatory prices. This has led to lower iron ore prices in China. Following China, some countries have been forced to follow China’s iron ore prices due to the competitive conditions of the global steel market.
*** China’s development measures and falling prices in the primary Wad market
Further restrictions by the Chinese government to control the iron ore market and the announcement of BHP’s readiness to produce at the South Flank mine have downgraded the iron ore market again. New plans to cut steel production have been heard in Tangshan, China, and factories have been asked not to produce for several days from 12pm to 10am last week. This is another new action while the week Factories had previously been instructed not to allow price increases to control the market. The latest price of 62% imported pure iron ore in China fell $ 4.6 to $ 210.85 per tonne of dry CFR.
*** Chinese government seeks to control iron ore price
China has said it will not allow irrational growth in iron ore prices and pass on the price increase to consumers. China has also asked coal producers to increase production. Apparently, the government is seeking more market control, more serious inspections of futures and cash markets, and dealing with market-stimulating transactions to control the situation. Coal producers have also been instructed to increase production to meet summer demand, as China’s coal production fell to its lowest level since July 2020 in April.
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