It seems that the path of profitability of Chinese companies continues despite the environmental crises. Sources told FastMart that iron ore prices rose on Monday, July 26, due to rising steel prices. But this is only one side of the market. News of declining production in China will soon lead to an unpredictable downturn. The market format indicates a drop in prices. But some analysts still believe in rising prices in the international market. In the following, we will evaluate this issue. Please be with Artan Press.
Iron ore prices rise in Dalian stock market contrary to analysts’ expectations
Iron ore futures for September trading on the Dalian Commodity Exchange (DCE) fluctuated in both yesterday morning and afternoon sessions, before a 1.1 per cent closing price was set at 1112 yuan ($ 173) per tonne on Friday. Next month, iron ore on the Singapore Stock Exchange (SGX) rose with the highest trading volume. As of 6:56 pm Singapore time, the increase was $ 1.67 per tonne compared to the settlement price on Friday of $ 197.33 per tonne. These currents have also been extended to the satellites and have benefited this sector.
Following the Chinese steelmakers’ profit-making rally, profits for hot-rolled sheet production rose to 830 yuan this week, the highest level in two months. The profit of rebar production is estimated at 444 yuan, which is an increase of 140 yuan compared to last week. This rise in prices was not a dominant trend for some analysts.
*** Start new round of China environmental monitoring
On Monday, an official of the Central Environmental Protection Agency, owned by the Ministry of Environment of the People’s Republic of China, announced in a press release that the office will conduct its second round of monitoring focusing on controlling high-consumption and high-emission industries. The implementation of the reduction of crude steel production will resume. It seems that some oversight in the field of iron ore by this institute will increase. We must add to these the rising costs of transporting iron ore.
The rise in the cost of transporting iron ore from Australia and Brazil and the increase in portable shipments to China have been the main reasons for the increase in shipping costs. This could affect the FOB price of iron ore from Australia and Brazil. If the growth of iron ore prices continues in this way, it will most likely make up for last week’s recession in the iron ore sector. But it should also be noted that rising transportation costs can reduce the rigidity of commodity markets. This has the potential to involve the entire steel chain.
*** Market prices support cross-sectional growth of the iron ore market
Yesterday’s steel prices support iron ore prices, especially in futures contracts yesterday morning. It seems that despite the environmental challenges and the cross-sectional recession of the iron ore market, this field has started to grow again. The hurricane in southern China closed some ports along the Yangtze River, and some ports in northern China may also be affected, which could also increase iron ore prices. Iron ore futures started the week positive after recovering from a reduction in steel production restrictions last week.
*** Iron ore futures and prices are expected to rise
Iron ore futures traded at 1,136.50 yuan ($ 175) a tonne in September, up 12.50 yuan a tonne from Friday. In other words, Dalian Commodity Exchange DCE futures for September delivery hit 1.51 percent, or 17 yuan ($ 2.62), in daily trading on Monday morning, July 26, to 1,143.5 yuan per tonne ($ 176.38). Rebar futures traded up 1.15 percent, or 65 yuan ($ 10.03), to 5727 yuan per tonne ($ 883.35) in daily trading yesterday morning.
*** Key factors influencing the Chinese steel market
If we want to refer to a comprehensive summary of the events in the international steel market, we must say that the most important events of the past day are the slight correction of prices and the stability of flat products in the range of 6000 yuan, the slight increase in domestic prices in the Chinese market and excitement control. Market at the beginning of the new week and unstable weather conditions in some areas. Floods and climate change, on the one hand, and power outages have reduced the production of many Chinese steelmakers; Climate change has also disrupted maritime transport; All these factors affect the demand for iron ore in the coming week
*** Reduce iron ore production with environmental considerations
Recent trading in $ 62 percent of imported iron ore, valued at $ 198, in the eastern Chinese province of Shandong, prompted a warning to the province’s steelmakers. Officials in the province have warned steelmakers to reduce production from now until December 31 to meet Beijing’s commitment to keep crude steel production below the 2020 level. An iron ore official and a Shandong-based steelmaker confirmed that they had received a statement from the local government stressing that they should reduce their crude steel production for the second half of this year. The companies said they had previously reviewed and revised their production plans for the coming months, but after announcing a new order, they also reduced their planning for their iron ore depot.
*** Significant decrease in trading prices for iron ore in September
The most active iron ore contract for delivery in September on the Chinese Dalian Commodity Exchange fell by almost 10% compared to last week.The biggest weekly drop since February 2020 is now 17% lower than the highest record in May. In Tangshan, the government’s determination to punish overproduction is much higher than in 2020, as China’s steel production has grown by 12 percent so far this year; With this in mind, some units must now postpone the start of production until 2022.
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