It is difficult to predict the supply and demand of iron ore under the epidemic situation.

SMM: data analysis and consulting firm GlobalData recently released a report showing that due to the new crown pneumonia epidemic and the decline in demand from the automobile industry, global iron ore consumption may fall 2.8% this year. The auto industry accounts for about 17 per cent of global iron ore consumption, but global light vehicle sales have fallen sharply so far this year, according to the report. GlobalData expects global iron ore consumption to fall 2.8 per cent to 2.04 billion tonnes in 2020.

A the epidemic in Brazil is out of control, making the world's largest mine even worse.

Affected by the rapid spread of the new crown pneumonia epidemic, Brazil's major financial institutions and relevant international organizations predict that the country's economic outlook is still uncertain in the second half of the year and may shrink sharply throughout the year. According to epidemic statistics released by Johns Hopkins University in the United States, the cumulative number of confirmed and cumulative deaths in Brazil is second only to the United States, which has the worst epidemic. The epidemic had a serious impact on Brazil's economy in the first half of the year. Data released by Brazil's National Geographic Statistics Bureau recently showed that although Brazil's industrial output increased by 7% month-on-month in May, stopping the sharp decline for two consecutive months, it was still down 21.9% from the same period last year. The Brazilian government appears to be ineffective in controlling the epidemic, with the rapid growth rate of new diagnoses and the high death toll, adding some hidden worries to the supply of resources in this resource-based country.

Vale

Vale's directed production of iron ore powder in 2020 is between 310 million and 330 million tons. This production has taken into account a possible reduction of 15 million tons affected by the new crown pneumonia outbreak. Vale's iron ore production from 2015 to 2019 is 333 million, 349 million, 367 million, 385 million and 302 million tons, respectively. Vale's target production this year is at a low level, only slightly higher than last year by 10 million tons. Thus it can be seen that with the global epidemic raging, it will be several years before Vale recovers from last year's dam break.

Brazilian steel mining co., Ltd.

Brazilian steel company CSN expects to produce between 33 million and 36 million tons of iron ore in 2020. The estimate includes self-production of iron ore and third-party purchases. In 2019, the total output of iron ore produced by CSN reached a record high of 32.09 million tons, and the third party purchased about 6.373 million tons, totaling 38.463 million tons. The target output for this year is 2.5 million-5.5 million tons lower than that of last year.

B Australia has strong resistance to epidemic, and mine production is less affected.

FMG

FMG raised its target for iron ore shipments in fiscal year 2020 to 175 million-177 million tonnes from the previously announced range of 170 million-175 million tonnes. The cash cost target is $12.75 per wet ton. The Eliwana mine and rail project, approved for development in May 2018, will be operational in December 2020 and is expected to produce higher-grade iron ore. This will help FMG maintain its annual production of 170 million tons over the next 20 years. The Eliwana mine is expected to produce 30 million tons per year. With the improvement of the epidemic situation of New Crown pneumonia in Australia and the production of new mining areas in the third and fourth quarters, FMG will maintain a state of high yield and high transportation in the second half of the year.

Rio Tinto

Rio Tinto's production fell in the first half of the year, mainly due to hurricane Damien, flooding in February, which damaged infrastructure in Pilbara and affected production. Rio Tinto said the epidemic has not yet affected Rio Tinto's iron ore production, but the company has taken some measures to prevent and control the epidemic. Rio Tinto's Pilbara iron ore shipping target remains unchanged at 324 million-334 million tons, and the unit mining cost target remains unchanged at 14,000,000 US dollars / ton. In terms of the new project, the first phase of the Koodaideri iron ore project began construction in 2019, which includes the design, manufacture, supply, transportation, construction, installation, testing and commissioning of the mine infrastructure and related facilities located in Koodaideri. The project is expected to start production in the second half of 2021. When completed, the mine will have an annual production capacity of 43 million tons, which will support the production of Pilbara mixed powder, Rio Tinto's flagship iron ore product. The new Koodaideri project is scheduled to be completed in mid-2021 according to the original contract. Rio Tinto is expected to maintain its existing production and sales volume in the second half of the year until a new round of capacity release begins in 2021.

BHP Billiton

BHP Billiton aims to ship 273 million-286 million tons in fiscal year 2020. BHP is expanding the (MiningAreaC) of the C mining area by developing the SouthFlank project. The project is expected to start production in 2021, replacing the depleted Yangdi mine. The project raises the average grade of Western Australian ore from 61% to 62% and the proportion of lump ore from 25% to 35%. SouthFlank expects to have an annual output of 80 million tons after it is put into production.

C the epidemic in India is not optimistic, but the output keeps growing against the trend.

According to data released by India's Ministry of Steel, India's iron ore production reached 246.5 million tons in the financial year 2019 to March 31, 2020, an increase of 19% from 207 million tons in the previous fiscal year and a record high of 219 million tons in 2009. According to the Indian Ministry of Commerce and Industry, India's iron ore exports rose 58.4% year-on-year to US $244 million in March, the only positive increase of all Indian exports in March. The epidemic in India is not optimistic, but iron ore production in India has been growing against the trend this fiscal year, mainly because mining companies accelerated the pace of iron ore mining before the mine lease expires on March 31, 2020. Iron ore production in India is expected to fall to a certain extent in the second half of the year.

D the import volume of our country is high, but the port inventory is declining.

In May, China imported 87.026 million tons of iron ore, an increase of 3.276 million tons over the same period last year, an increase of 3.9 percent, a decrease of 8.686 million tons compared with the previous month, and a daily average drop of 12.0 percent. The average import customs price was 87.44 US dollars per ton, down 1.86 US dollars per ton from the previous month.

From January to May 2020, China's iron ore imports reached 450.209 million tons, an increase of 24.895 million tons over the same period last year and an increase of 5.85 percent over the same period last year. According to the comparison of the data from 2015 to May 2020, the import volume this year exceeds that of the same period in previous years, which is 3.185 million tons more than that in 2018, which is the second highest in the same period.

In terms of overseas re-exports, according to the tracking results of Mysteel's resale of Changsha mines to Japan and Europe, about 700000 tons of iron ore were resold from Japan to China in May, including Mike powder, Yandi powder, Canadian powder and pellets, with a 50% reduction in resale volume compared with April. On the one hand, Japanese steelmakers sold May and June ore ahead of schedule in March and April; on the other hand, Japanese steelmakers adopted the same approach as European steelmakers in May, reducing part of the long-term cooperation volume with mines. Based on the above two factors, the resale volume in June will not be too large, which is expected to be less than 1 million tons. In Europe, research on mines in Sweden, Ukraine, Russia and other countries shows that the amount of iron ore resold to China by mines in these countries is expected to remain at about 1 million tons.

Iron ore imports this year are at their highest levels in recent years, but port ore stocks continue to decline. As of June 4, 2020, there are 45 major ports in China.

E if the epidemic situation is well controlled in the second half of the year, consumption will gradually pick up.

According to the (WSA) of the World Iron and Steel Association, the total output of crude steel produced by steel producers in 64 countries around the world was 137 million tons in April 2020, a decrease of 13% compared with the same period last year.

Under the epidemic of Xinguan pneumonia, the output of crude steel has decreased to a great extent in most countries and regions except China. For example, Japan's JFE announced on April 15 that due to the low demand for steel caused by the Xinguan pneumonia epidemic, it was decided to carry out blast furnaces at the end of April and the end of June for No. 4 blast furnace in Kangji area and No. 4 blast furnace in Fushan area respectively. Two blast furnaces will affect the production capacity of JFE25%.

The domestic blast furnace operating rate and capacity utilization rate have reached a high level. According to the data of 247 steel mills surveyed by Mysteel in the second week of June, the blast furnace operating rate was 91.67%, up 0.65% from the previous week, and 1.17% from the same period last year. The utilization rate of blast furnace ironmaking capacity was 92.35%, 0.45% higher than the previous week, and 1.78% higher than the same period last year. The average daily output of hot metal was 2.4583 million tons, an increase of 11900 tons over the previous month, and an increase of 47300 tons over the same period last year. The production of Chinese steel mills has been very little affected by the epidemic, and the operating rate of blast furnaces has remained high. At present, the profit margin of steel mills is 94.37%, an increase of 1.30 percentage points from the previous month, and a decrease of 1.73 percentage points over the same period last year. There is little room for the blast furnace operating rate of steel mills to continue to increase in the second half of the year. China's iron ore consumption may grow slowly and slightly on the current basis, and gradually decline after reaching a peak before the heating season in the fourth quarter.

The phenomenon of blast furnace reduction in overseas steel mills is serious, and the steel mills determine the degree and duration of production reduction according to terminal demand, so overseas iron ore consumption depends more on the development of overseas epidemic situation and the degree of economic recovery.

Data show that April and May were the peak periods for overseas steel mills to announce production cuts in the first half of the year, and in June, steel mills gradually resumed work and production as the epidemic stabilized. From a national point of view, the top five countries with crude steel output except China are India, Japan, the United States, South Korea and Russia.

India's steel industry is relatively depressed, with production falling sharply so far this year, with crude steel production falling 20 per cent year-on-year to 8.04 million tonnes in March and capacity utilisation falling to 67.8 per cent from 84.7 per cent in the same period last year, according to the Ministry of Steel.

India, the United States and Russia are currently in the stage of a major outbreak, the cumulative number of confirmed cases continues to rise, the epidemic has not been effectively controlled, the situation is more serious. If these countries take more active and stringent anti-epidemic measures, steel production is expected to resume one after another in the fourth quarter. But for countries such as India and Brazil, limited by their economic conditions and medical standards, there is a long way to fight the epidemic and a long way to recover. At present, the epidemic situation in Japan and South Korea is well controlled, and crude steel production and iron ore consumption are expected to pick up gradually in the second half of the year.

In the second half of the year, we believe that the changes in the supply side of Brazil need to be paid more attention to: first, the demand side of iron ore is relatively stable, and China's iron ore consumption will remain stable as a whole. Iron ore consumption in Japan, South Korea, the United States and other regions is expected to gradually recover in the third and fourth quarters, with the overall demand margin increasing by about 2.3%. Second, Australia's anti-epidemic measures have performed well, iron ore production may have increased, while India's supply margin has decreased. Third, had there not been an epidemic, iron ore production and shipments in Brazil would have increased significantly in the second half of the year, but now that the epidemic has broken out, Brazil is the second largest confirmed country, and its medical and health conditions determine that it will take a long time to fight the epidemic.

To sum up, we believe that if Vale's annual production target can be achieved, then the increase in supply will be greater than the increase in demand in the second half of the year, iron ore prices will change from strong to weak, and as new mines in Australia are put into production, iron ore prices will not be the same in the next few years; if the epidemic in Brazil and India continues to expand, iron ore prices will remain high and inventories will remain low in the third quarter.

In the short term, the domestic demand is strong, and under the background of the gradual resumption of work and production in overseas developed countries, the demand for iron ore has a strong guarantee. On the supply side, major iron ore producers such as Brazil, India, South Africa and Peru have been significantly affected by the epidemic and are difficult to recover in the short term. But we should also pay attention to the risks: when Brazilian shipments increase sharply and continuously, domestic steel consumption continues to decline, and under the guidance of government policies, iron ore prices may turn significantly.

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