Market participants predict a very downward demand outlook for the iron ore market and are skeptical of any price return until at least the first quarter of 2022. Therefore, the outlook for iron ore demand seems to be declining by the end of the year. This trend will also overshadow the Iranian market. The iron ore futures market failed to cross the $ 120 resistance barrier and returned to the $ 115-110 range, down about $ 8. In the following, we will evaluate this issue in more detail according to the reports of Metal Bulletin. Please be with Artan Press.
*** Weak demand for iron ore in the recent Dalian Stock Exchange transactions
Weak demand for iron ore has been a major factor in lowering maritime prices. This is mainly due to current restrictions on steel production in several provinces in China. The impact is likely to be exacerbated by the recent release of the country’s energy imbalance policy and greenhouse gas emissions. Indeed, China’s macro-policies have reached a level of ambiguity for which no definite path can be drawn. This has made the Chinese energy crisis more serious. This scenario and its related factors seem to have the greatest impact on the iron and steel futures market. What is certain in the current situation is the negative outlook for iron ore demand. This issue should be carefully monitored in the markets with possible scenarios.
*** Demand for downward demand until the first quarter of 2022
The iron ore market has been under pressure since July following weak demand. After market rumors about the Chinese government’s intervention to curb steel production this year, more than last year. Since then, several provincial governments in China have imposed steel production restrictions for the rest of 2021. Or have taken steps to bring production levels in line with last year’s standards. Although no official policy has been announced yet.
The Guangxi provincial government, for example, held a meeting with its steelmakers at the end of August. The purpose was to discuss plans to reduce steel production. Which is likely to make September crude steel production from the province almost 30% lower than its average monthly production. Sources said that in the first half of 2022, this declining trend will have an impact. It seems that the steel market will face the prospect of iron ore demand for a long time.
*** Provincial restrictions on Chinese iron ore transactions
The provincial government in Johann also imposed restrictions on industrial activity, and steel mills were strongly encouraged to shift at least 30 percent of their September production to November and December. “As more provinces emerge with restrictions on steel production, sentiment for the iron ore market will continue to stagnate due to weak demand. According to sources, China’s new energy policy and greenhouse gas emissions,” said a Singapore-based trader. It will last until the first quarter of 2022. This weakens the demand outlook in the iron ore market.
*** China’s environmental policy and reducing iron ore demand
The draft policy plan was released by the Ministry of Environment on September 18. This indicates that the ministry has increased the initial 26 cities to 64 previously. Seasonal factors may also weaken demand. “As winter approaches in the third quarter of this year, restrictions on steel processing will continue. These will cause demand for iron ore, and consequently steel, to be severely slumped,” said one Shanghai analyst.
*** Decrease in trading and prices of iron ore in East Asian stock exchanges
The average monthly fast market index for iron ore was 62% Fine Iron, cfr from Qigdao Port in September at $ 120.95 per tonne at the time of writing, $ 38.71 per tonne (24.2%). The average of August has decreased. The monthly average for Brazil’s 65% fine rail index, cfr from the same port, was $ 143.48 per tonne in September at the time of writing. The shipment was down $ 41.02 per tonne (22.2%) from the August average.
“In January, I think the price of 62% iron ore is likely to be around $ 90 to $ 100 per ton [cfr China] by the end of the year,” said one Shanghai analyst. Market, I think it is possible to reduce prices to about $ 80 to $ 90 per ton [from China]. کردن.
*** Significant signs of weakening iron ore demand from the perspective of the fast market
Sources told the fast market that another clear sign of weakening demand for iron ore was the monthly discounts issued by miners on their products. For example, BHP has reportedly set a discount percentage for October for some of its products. Several market sources said that the levels were much higher than the September discounts. This indicates that there are financing concerns on the supply side.
*** East Asian Stock Exchange Traders Quote
“The Fortescue Metals Group [FMG] has not yet set a monthly discount for its products for October. But the levels should be higher than in September,” said a Hong Kong-based trader. The September discounts for FMG (SSF) and Fortescue (FBF) mixed fines were 30% and 26%, respectively, up from 27% and 19% in August, the Hong Kong trader said. And FBF in the range of 30 to 40 bar October will not be a surprise. “Demand for iron ore is expected to be weak.” It looks like the iron ore market will be severely challenged.
*** Efforts to reduce demand for iron ore in warehouses
In China’s secondary market, steel mills are heard to offer their long-term shipments with PBF. Because of steel production restrictions, they want to keep inventory levels low. Some of these offers are offered at a discount of between $ 1 and $ 2 per tonne compared to the October average compared to the primary market offers which had a premium of about $ 1-2 per tonne.
Traders said that the average price of fine iron in the coming months will be strongly affected by the fall in prices. Steel mills were trying to drain excess PBF reserves to the market.
It seems that the consumption of iron ore in the market will decrease sharply. At present, storing coal and increasing inventory in these conditions is not the choice of any producer. Factories are likely to take a more cost-effective approach.
*** Evaluation of the price factor of coke iron ore in the world steel market
The high price of coke coal has been the main driver of factories to shift their focus to the factory. Offshore iron ore prices fell on Tuesday (September 28th). Market participants have almost finished their pre-holiday storage, sources said. Other Chinese provinces have imposed more restrictions on electricity consumption and steel production. Of course, Wednesday’s indicators show support in the market. The price of steel chain products rose again in today’s trading on the China Futures Exchange. The price of iron ore regained the support of 700 yuan. The price of rebar and hot rolled sheets has increased by nearly 1% so far. Coke and coal prices were up nearly 5 percent at the beginning of trading and are now fluctuating in the range of 2.5 percent.
*** End the scenario of increasing inventory
Iron ore stockpiling appears to have ended after the holiday in China, and demand for iron ore is still expected to decline as production declines due to power shortages and coercion by the Chinese government. Another drop in iron ore in China has been evident in the market in recent days. Some market participants see the recent increases in iron ore as temporary and related to pre-holiday Chinese storage in the first week of October. The significant increase in the volume of construction steel transactions in China is quite evident due to the fear of declining production.
Analysts believe that the recent rise in iron ore prices is only a correction of the price after the recent falls and is not stable given the demand situation. The productivity rate of Chinese steelmakers rose from 83.74% to 82.06% last week. Pressure to reduce steel production has not eased, and the government is urging more areas around Beijing to cut steel production to have cleaner air at the Winter Olympics. On the other hand, the price of rebar in the Chinese market increased by one percent to $ 861 and hot rolled sheet with a 0.6 percent improvement of $ 866 per ton.
*** Index trades on Dalian Stock Exchange
The biggest January iron ore futures deal on the Dalian Commodity Exchange (DCE) fell 3.5 percent to 703 yuan ($ 109) a barrel on Monday. Next month’s iron ore trading on the Singapore Stock Exchange (SGX) fell on Tuesday. As of 5:54 p.m. Singapore time, October’s highest deal was $ 6.24 per tonne, while Monday’s settlement price was $ 118.99 per tonne.
Sources said market participants were expecting the approach on Tuesday after reactivating stocks in port markets on Monday and last week to produce steel during the Chinese National Day holiday from October 1 to 7. Several speculators traded last week reportedly stockpiling iron ore in the October market with rising prices. This is because they have positive demand together in the fourth quarter.
*** Latest estimates of iron ore trading rates on the Singapore Stock Exchange
Traders from northern China said the market situation would be balanced if China’s steel mills pledged productivity amid production constraints and the task of providing heating to citizens in the winter. Whereas yesterday, the price of 62% of China’s iron ore’s October delivery in Singapore Stock Exchange futures reached $ 120, today it experienced a sharp decline. The Singapore Stock Exchange futures panel data shows that the stock is currently trading at $ 110.80. Demand for high-grade iron ore pellets will increase in November.
*** Significant decrease in iron ore inventories in Brazil and Australia
Iron ore inventories in Australia’s seven major ports fell 12.46 percent to 11.38 million tonnes, indicating that the world’s iron ore giants are doing their best to carry the maximum cargo and provide documents before closing. China have done. The price of 62% of China’s iron ore’s October delivery in the Singapore Stock Exchange futures reached $ 120, again today fell sharply. The Singapore Stock Exchange futures panel data shows that the stock is currently trading at $ 110.80.
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