SMM5 28 month news: into the early summer, all over the place can be described as the scorching sun at noon, burning all burning. Similar to the oven day, the market for iron ore is also rising. After nearly half a month of small consolidation, it suddenly rose frequently in mid-May (660yuan / ton on May 15), up 96.5yuan / ton, or 14.6%, compared with the day close of 756.5 yuan / ton on May 28, or 14.6% on the 10th day. At one point, the highest point was 774.5 yuan per ton, a five-year high since 2014.

(iron ore main contract closed at 756.5 yuan / ton on the day of May 28, up 0.4 per cent)

Supply-side concerns are still strong on the demand side.

Concerns about iron ore supplies remain as problems continue to simmer at the mines of Brazil's Vale (Vale), the world's largest iron ore producer, according to SMM data. The recent arrival of iron ore in Hong Kong and the departure of Australia and Brazil continue to decline, and port stocks may be difficult to accumulate in the near future, continuing to support mining prices. On the demand side, according to the National Bureau of Statistics, in April 2019, The production of crude steel, pig iron and steel in industrial enterprises above the national scale has been accelerated, and the average daily output of steel has reached a new high, which shows that the demand for iron ore in steel mills has increased unabated. Generally speaking, SMM expects that iron ore will show a pattern of high shock in the future. In the near future, iron ore fundamentals are still in short supply and demand is strong, and the demand side is also strong. According to SMM research, at present, the cost of arrival is relatively high, resulting in the low willingness of merchants to ship at a low price. Steel mills basically maintain low inventory on demand procurement.

Iron ore prices all the way up the cost of steel mills

In the first quarter of 2019, the performance of domestic iron and steel companies generally did not seem to be satisfactory. According to Ping an Securities data, according to the first quarter of 2019, 33 listed iron and steel companies suffered losses in addition to Bayi Iron and Steel in the first quarter. The remaining 32 listed steel companies are profitable to varying degrees. Compared with the level of the same period last year, the operating performance of the iron and steel industry shows the phenomenon of "increasing income without increasing profit".

The phenomenon of "increasing income but not increasing profit" in 2019Q1 industry is prominent:

According to data released by the China Iron and Steel Industry Association on April 28, in the first quarter, the national production of pig iron was 195 million tons, an increase of 9.29 percent over the same period last year, and the production of crude steel was 231 million tons, an increase of 9.92 percent over the same period last year, and 269 million tons of steel was produced. It was 10.82% higher than the same period last year. Among them, member iron and steel enterprises produced 157 million tons of pig iron, an increase of 6.94 percent over the same period last year, 173 million tons of crude steel, an increase of 7.31 percent over the same period last year, and 161 million tons of steel, an increase of 5.99 percent over the same period last year. The output of pig iron, crude steel and steel increased by 20.34%, 18.58% and 18.96%, respectively. The output growth rate of non-member enterprises is much higher than that of member enterprises.

In terms of output, steel production reached a 10-year high in the first quarter of 2019. Ping an Securities believes that due to the large increase in steel production, it has made up for the loss of revenue caused by the fall in steel prices. As a result, overall industry revenue continued to grow slightly in the first quarter of 2019.

Brazil's freshwater Hegu mine disaster continues to ferment from time to time, coupled with the expected speculation in the capital markets, iron ore prices are still high; Affected by the high level of iron and steel production, the prices of other raw materials are still high as a whole, and the pressure of rising costs has not been alleviated. As the price of iron ore continues to rise, the cost of steel mills continues to increase.

(iron ore prices have been climbing since this year.)

Ping an Securities expects that while the downward pressure on the economy still exists and the real estate policy is difficult to relax, the infrastructure support for steel demand may be difficult to support alone, and at the same time, due to the rapid release of output supply, the contradiction between supply and demand in the iron and steel industry has emerged. Steel prices are difficult to rise compared with the same period last year. The cost side is constantly rising under the leadership of iron ore, and the performance of steel enterprises is difficult to improve significantly in the second quarter.

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