Metals News
Reappearance of "strong Mine and weak Steel" at Gate 900 at Iron Ore Station
Jul 3,2019
The content below was translated by Tencent automatically for reference.

SMM News: as of the afternoon of July 2, thread 1910 closed 4053, down 1.34%; hot coil (3887,-42.00,-1.07%) 1910 closed 3918, down 1.80%; iron ore (898, 11.00, 1.24%) stone 1909 closed 900, up 5.20%; coke (2107, 4.00, 0.19%) 1909 closed 2110.5, up 0.26%; Coking coal (1383,-17.50,-1.25%) 1909 closed at 1400, up 0.61%. At the beginning of night trading, iron ore was still strong, but there were signs of diving in late trading, closing 901, up 1.64%, while other varieties also fell back. In addition, the period snail, which is closely related to iron ore, no longer follows the pace of iron ore and begins to oscillate and call back.

Yesterday, iron ore futures shine again, successfully breaking through 900 yuan / ton, prices refresh the highest level in five and a half years.

As one of the brightest "stars" in commodities so far this year, iron ore futures prices are still breaking new highs.

As a result, a small partner of the bustling black circle of friends told reporters that what was asked the most yesterday was, "Why has iron ore futures been rising all the time, can it break through 1000?" Why doesn't the rebar (4020,-43.00,-1.06%) go up? "

One industry source, who spoke on condition of anonymity, told the Futures Daily that the simplest and roughest answer was signs of easing production restrictions in Tangshan and that demand for iron ore remained positive.

It is reported that the latest Tangshan document on the afternoon of July 1, "enhanced Control Plan for the Prevention and Control of Air pollution in Tangshan City in July," put forward: Shougang Qiangang, Shougang Jingtang, Wenfeng Iron and Steel (of which there is no limit to production from July 15 to 31), Tangshan Iron and Steel Co., Ltd. Medium and heavy plate, Delong Iron and Steel, vertical and horizontal iron and steel, sintering machine (pellet), blast furnace, converter, lime kiln production limit of 20%; July 1 to 15 Tangshan Iron and Steel can not limit production; From July 15 to 31, Huaxi Iron and Steel, Tianzhu Iron and Steel, Guoyi Special Steel can not limit production.

"judging from the latest documents, there are signs of relaxation in the production restriction policy, market sentiment has returned to rationality, and spot prices have fallen back. At present, building materials are in the off-season, the terminal demand on the spot price driving force is not enough, the disk back to the empty snail multi-ore logic. Under the original production limit forecast, it is estimated that the port inventory may be slightly accumulated in July. If the production limit is relaxed, the iron ore may continue to go to the warehouse in July, and the spot is still easy to rise and fall, and the current 09 basis difference is about 90, the disk is expected to still be strong. " Galaxy futures black metal researcher Hao Xiangpeng said.

A reporter from the Futures Daily found that since Tangshan issued the "notice on stopping production restrictions for Iron and Steel Enterprises in the whole City" on June 23, although it has only about 10 days, but around the theme of production restrictions in Tangshan steel mills, the market logic has been switched many times.

As we all know, Tangshan production restriction rumors began to ferment in the market on June 21, when the futures market began to have a more obvious reflection, changing the long-standing pattern of "strong mine, strong snail and weak". From June 21 to 25, steel prices rose sharply continuously, while iron ore showed a sustained pullback from its high level. At this time, what runs through the market is the production reduction logic of steel enterprises, which brings about the repair of the relationship between steel supply and demand and drives the bulls in the market. At the same time, due to the production restrictions of steel enterprises, the demand for iron ore is suppressed. It seems that the production reduction of steel enterprises has solved the surplus of steel and the shortage of iron ore at the same time.

In fact, with the growth of iron ore on the 26th of June, the logic of the market changed again, and the Tangshan production restrictions began to be implemented one after another. After calculation and derivation, the market found that even if the production restrictions in Tangshan were relatively strict, due to the relatively large iron ore supply gap this year, it is very difficult to fundamentally solve the problem of iron ore supply gaps by relying solely on Tangshan's production restrictions. And on the late shipment of foreign mines once again facing the problem of reduction has been gradually confirmed by the market, from June 27 to 30, the spiral mine rose sharply.

Ma Liang, an iron ore researcher at Guotai Junan Futures, said that after the release of the Tangshan production restriction document, its intensity far exceeded market expectations. At the same time, as this year coincides with the 70th anniversary of the founding of the people's Republic of China, the market has relatively consistent expectations for the expansion of the scope of production restrictions in the later period and the extension of time. At a news conference held by the Information Office of the State Council on 27 June, Zhai Qing, vice minister of the Ministry of Ecological Environment, said that environmental protection should be banned from "one size fits all". It brings some uncertainty to the market. On 1 July, the Tangshan Municipal Government issued a notice on "strengthening the Control and Control Plan for the Prevention and Control of Air pollution in July". On the basis of the "Circular on stopping production restrictions for Iron and Steel Enterprises in the whole City", the requirements for the suspension of production limits relaxed by some steel enterprises were interpreted by the market as a signal of relaxation of production restrictions, and the spiral ore relationship was reversed again, the thread hot coil rose and fell back on 1 July, and a sharp pullback occurred on 2 July. Iron ore rose sharply, with the I1909 contract breaking through the 900 yuan / ton integer barrier.

For the differentiation of black varieties, let's see what the market people say?

One trader, who spoke on condition of anonymity, said iron ore port inventories, which had fallen by nearly 30 million tons, had previously been higher than before 2016, so the rally had something to do with speculation about supply and demand. However, for the 900 yuan mark is already the top view, he is opposed to the view, "Iron ore in 2008, 2011 can break through the thousand yuan mark, why do you think it can not be thousands now?"

The Platts price index has also been soaring overnight, now at $121.2, also a record high.

Some people in the industry believe that the main contract of iron ore has now reached the third target range of 850-900, which can no longer be higher. he believes that the third goal range is already emotional guidance and realizing his dream. "in such an economic context, more than 900 are floating clouds, and only fairies can control them."

"Tangshan City is limited in production, and the market logic has changed many times in a short period of time. Due to the uncertainty of the policy itself, the market volatility has increased in the short term. In the face of such a high uncertainty and volatile market, investors are advised to face up to risks and rational participation." Ma Liang said.

However, compared with the strong iron ore, steel prices have not maintained the same upward trend.

According to the latest data from the China Iron and Steel Association, the average daily output of crude steel in key iron and steel enterprises in early June was 2.0605 million tons, an increase of 2.80 per cent over the previous ten days. At the end of the first ten days of June, the steel inventory of key iron and steel enterprises was 13.0215 million tons, an increase of 14.68 per cent over the end of the previous decade.

Production is at a record high and demand is in the off-season, which is why prices are weak. "at present, the profits of steel enterprises are already very thin, if the prices of finished materials continue to fall, raw materials continue to rise, steel enterprises face losses." A person from a steel enterprise in Hebei said.

The reporter found that recently, affected by the reduction of coke prices in steel mills, the coking plant opened the third round of price reduction model. "after the third round of coke reduction of 100 yuan per ton in Tangshan, Handan and other steel mills, most coke enterprises have carried out delivery at new prices. Liu Yanjun, director of the Fen Wei Energy Price Center, told reporters.

Coke spot fell, what is the current situation of coking coal? People familiar with the matter told reporters that in July, raw coal from the producing area opened a comprehensive decline model, in which more coal mines after one or two rounds of price decline, inventory and sales have not been significantly alleviated, resulting in prices down again, of which the prices of lean main coking coal and main coke resources in Changzhi and Linfen areas have been reduced by 110 to 130 yuan / ton, which has fallen below the low point in the first half of the year. In the short term, the price of coking coal is under pressure.

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