[iron ore] the price difference between Brazil's high-grade mines and Australia's mines has reached a new high in the short term or is unlikely to narrow significantly

Judging from this week's price changes of various varieties, the card powder represented by the Brazilian mine, as well as BRBF, continued to be strong. On the one hand, it benefits from the high profits of steel mills; on the other hand, it is closely related to the continuous decline of port Brazilian resource inventories; moreover, the decline in fine powder production caused by environmental reasons in Tangshan area also forms a price support for low-aluminum and high-quality mines.

According to SMM data model, the thread profit of steel mill is still more than 1000 yuan / ton, and the current net profit of some steel mills in Tangshan can reach 700 × 800 yuan / ton, while the hot coil profit continues to maintain 1200 yuan / ton. Under the stimulation of high profits, steel mills continue the strategy of high quality, aluminum reduction and output protection.

Moreover, according to SMM tracking, the current northern port of Brazil's overall shortage of resources, Vaca and Pakistan rough inventory continued to decline throughout July, the current inventory than at the beginning of the month fell by more than 56 per cent. As a result, a steel mill in North China reported that when the price of PB powder fell this week, Vaca and Pakistan showed a small rise, but the steel mill still buys on demand and accepts the price increase.

Moreover, according to SMM research, because of environmental restrictions, Tangshan state-owned and private mines from July 27 to 8.7 were ordered to shut down all, leading to the original shortage of fine powder supply intensified. Moreover, the current domestic fine powder inventory is on the low side, some mines said that August orders have been snatched, domestic fine powder prices may strengthen.

In addition, SMM also learned that steel mills in the northern region may gradually open the domestic fine powder winter storage plan, in order to ensure winter reserves, some steel mills even began to receive a large number of cash, domestic fine powder price strengthening may help Brazil's low aluminum resource prices.

In the short term, the price difference between the high and low prices represented by Brazil's low aluminum resources is still strong, but considering that Vale still has an incremental release of more than 30 million tons in the second half of the year, the price difference may gradually shrink at that time.