Uncertainty remains about the outlook for the iron supply chain in the Asia-Pacific region. A number of key determinants still seem vague. The fourth season of the year is spent in China as China’s environmental and control pressures have challenged the steel market. China’s steel market is likely to be more controlled in the coming months. In this report, we will discuss the most important factors affecting the Chinese steel market in the last three months of the year. Please be with Artan Press.
*** Creating new iron ore reserves affected by the current atmosphere of the Chinese steel market
Chinese President Xi Jinping said China must have large national reserves of goods to meet its demand. Jin Ping made the announcement at a meeting of the Central Committee on Reform on August 30. China’s policy of controlling the Chinese steel market seems to be a serious issue. He said in part that the problems in China’s steel supply chain should be addressed at the lowest possible cost. China seems to be looking to optimize and regulate iron ore reserves in the Chinese steel market. This reorganization may affect the outlook for China’s iron and steel supply chain in the medium term.
*** Centralization in the steel market
Jinping also announced the need to centralize an emergency storage system. It seems that the Chinese steel market is looking for centralism after a period of expansion. In recent months, the Chinese steel market appears to have sought to strengthen its warehouses for the next six months. He said in part that the storage would include central and local production capacities to protect assets and improve regional distribution. “National reserves oversight needs to be intensified,” Jinping said. “We need a combination of professional oversight, industry oversight and territorial oversight to achieve the vision.”
*** Determine the roadmap for East Asian iron ore
China’s Ministry of Natural Resources announced on August 29 that it is working to map the iron ore road as a strategic mineral resource. He said the aim of the effort was to ensure that iron ore was a key target in exploration operations. He stressed the importance of the goal that the storage and extraction of iron ore should be the strength of the Chinese steel market. According to the announcement, the ministry is also developing new guidelines on internal strategic resources for 2021 to 2035.
*** Factors slowing down China’s global steel trade
A low-grade iron ore (about 30 percent pure iron) and high mining costs have long limited Chinese iron ore exploration in China, a Shanghai-based trader told Fast Market. “China relies heavily on iron ore imports, especially from Brazil and Australia, to maintain strong domestic demand. The issue of iron ore storage in China seems to be a hidden scenario in the country,” said another Shanghai trader. “Increasing the supply of high-quality domestic iron ore in China will reduce its dependence on long-term imports,” the trader said.
*** Chinese iron ore market dominated by Brazil and Australia
Many market participants predict that iron ore inventories will reach about 160-170 million tons by the end of 2021. This figure, which is mainly due to the increase in shipments to Brazil and Australia, does not seem far-fetched. China’s steel market is heavily affected by imports in the current range. Environmental pressures have challenged iron ore production.
“Brazilian and Australian miners will try to meet their shipping estimates by the end of the year. So higher volumes are expected to be delivered to China by the end of the year. Tax uncertainty over steel exports continues,” said a Singapore-based trader. Transportation fines and premiums in China have become a major trading risk, ambiguities over China’s steel export tax continue, and many other traders are looking to buy shipments from Chinese steel mills for export. They are not outside.
*** Tax risk in the international steel market
A Chinese trader had previously told Fast Market. It will be very difficult to deal with if new taxes on steel exports are announced and buyers reject the shipment. Steel mills have also reduced their exports. The reason for this is to seek to avoid Chinese officials in the midst of ongoing efforts to reduce steel production and maintain supply for domestic markets. Market sources continue to view September 1 or 15 as a possible date for announcing new steel export taxes.
*** Decline in coal trading on the China Stock Exchange
The supply of coke coal is limited due to environmental protection inspections and coal mine accidents. Although coking coal production has increased recently, it is relatively low. The fast market valuation of the Chinese domestic market of hard coke, originating in Shanxi, was 3,000-3,900 yuan ($ 464-603) per tonne. On August 30, this figure increased by 1,070-1,520 yuan per tonne compared to the previous month. “The supply bottleneck was expected to narrow after January, but it intensified,” he said. This helped raise the price of cfr coke.
*** Fast market evaluation of coal prices
Fast Market Calculation for CFR Coal Coke Index from Xiang Port on Tuesday, August 31 to $ 421.85 per ton
Interestingly, this figure started from $ 251.47 in May. A trading source predicted that the price of high-grade cfr coke cfr will continue to rise in September.
Domestic supply of Chinese coke is limited and prices have increased sevenfold since the beginning of August. The price of each transaction rent has increased by an average of 120 yuan ($ 19). According to sources, the eighth price increase is also on the way. A coke producer in Hebei province predicts three more rounds of price increases in September. Meanwhile, a commercial source of coke coal said that the price increase will continue until the end of September.
*** Environmental programs await the commodity market
On August 31, China’s eastern Jiangxi Province put on the agenda a draft plan to more closely monitor high-energy, high-emission projects. To limit new construction, reconstruction and expansion of such projects are likely to be on the agenda. The draft plan states that the capacity replacement rate should not be less than 25% of the current pollution per inspection period. Commodity markets seem to be strongly affected by these plans and drafts. This will also affect the Chinese steel market.
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