According to SMM steel statistics, as of Nov. 9, iron ore stocks in 35 ports were 131.62 million tons, down 1.7 million tons from 133.32 million tons last week. Tangshan Jingtang Port arrival ships are still on the low side, but sparse ports rose steadily from last week, and stocks fell faster.
This week, the overall daily average daily open port volume fell by 107000 tons to 2.706 million tons compared with last week, although the decline is relatively large, but the daily average daily sparse port volume still maintained a high level. This week, the daily average of some ports along the Yangtze River decreased slightly. On the one hand, affected by the Shanghai Expo, some docks along the river arranged for maintenance, affecting steel mills to pick up goods. On the other hand, recently, the implementation of "looking back" in environmental protection supervision and inspection along the Yangtze River has been relatively strict, and the number of ports has dropped slightly compared with the previous month.
[weekly Price Review]
This week, Liantie first suppressed and then rose, and the second half of the week showed a strong performance; spot market prices fluctuated within a narrow range. SMM tracking Qingdao and Jingtang port PB powder prices as of Friday quoted respectively 590,600 yuan / ton. The MMi 62 per cent iron ore port spot price index closed Friday at 591yuan / tonne, down 10 yuan / tonne from the previous month. The MMi 62%CFR price was $76.09, down 22 cents a tonne from the previous week.
[summary of weekly supply]
According to the iron ore arrival data tracked by SMM, the arrival of iron ore from China's major ports is expected to increase by 180000 tons month-on-month from 11.2 to 11.8. Current mainstream MNP inventories in major ports (Qingdao, Rizhao, Jingtang and Caofeidian) are up slightly by about 50, 000 tons, or about 0.8 per cent, from the end of October. Of these, PB powder stocks currently total about 3.5 million tons, down 138000 tons, or 3.8 per cent, from the end of October.
This week, the mainstream MNP inventory has rebounded, and the decline in PB powder inventory has slowed down, and the demand of steel mills affected by heating season production restriction, environmental protection inspection and production restriction at the Expo is slightly weak, which is not conducive to the continued rise of ore prices. However, due to the impact of BHP Billiton train derailment this week, the market is still optimistic about the short-term supply of ore, spot market merchants have a high intention to raise prices. Although the mine spokesman said that it will resume normal operation as soon as possible, but the arrival of goods is expected to slow down later.
[summary of requirements for one week]
This week, in addition to the decline in the daily average of some ports along the river, Shandong and Tangshan ports rose steadily compared with the previous month, indicating that the current demand for steel mills is still high. According to the calculation of SMM data model, the thread profit of steel mill is close to 1000 yuan / ton, while the profit of hot coil is rapidly reduced to less than 400 yuan / ton.
SMM Iron and Steel has conducted an investigation on whether the material structure will be adjusted in steel mills with declining profits. Most steel mills say that they do not intend to adjust the proportion at present, and that the materials used are still dominated by the mainstream medium and high grade ores. The main reasons are as follows:
(1) because the profits of steel mills in different regions are different, even if the profit of hot coil is reduced to 400 to 500 yuan / ton, it is still profitable, and steel mills still give priority to ensuring that the output is cashed in profit, and will not consider reducing the cost to adjust the proportion of materials for the time being. Especially large enterprises, stable production is the primary goal.
(2) the rapid decline in hot coil profits is mainly due to the amplification of the recent price decline, resulting in a month-on-month decline of more than 60% in hot coil profits. Even if the raw materials need to be converted from high to low products, it will take about two months, so the demand for medium and high grade mines will remain unchanged in the near future.
To sum up, in the supply-side "continuous" situation, the short-term supply of medium and high products may be significantly alleviated; and the demand side in the heating season production restrictions have not yet fully launched, the import mining market or continue to rise and fall. However, we need to be careful to drag down the material and start next week the implementation of the production limit for the heating season on November 15.