SMM Network News: foreign areas for iron ore demand for short-term difficult to have a big increase, which means that the follow-up of foreign ore shipments will be more into the country. In the second half of the year, there will be a certain increase in foreign mineral supply, while domestic demand is more resilient, and port inventories will pick up somewhat.
In the second half of the year, with the further increase of foreign mine production and shipping volume, domestic port inventories will stop falling and pick up, and the situation of iron ore supply falling short of demand will be alleviated. From the demand-side analysis, affected by the weakening demand for steel, the output of hot metal may shrink while maintaining toughness, while the weakening of finished product prices will also drag down the ore price. Pay attention to the opportunity to go short.
The shipment of foreign mines rebounded.
In Australia, Rio Tinto maintains its shipping target at 324 million-334 million tons in fiscal year 2020. Rio Tinto's second-quarter quarterly report showed that total production in the first half reached 170 million tons, up 3.6 per cent from a year earlier, while total shipments in the first half were about 170 million tons, up 3.8 per cent from a year earlier. Relevant data show that in recent years, Rio Tinto's shipments in the second half of the year are more and more stable than in the first half of the year. At present, the total shipping volume of Rio Tinto's Pilbara mine in the first half of the year has reached 160 million tons, which is 164 million-174 million tons short of the annual shipping target of 324 million-334 million tons. The follow-up weekly average shipping volume needs to be kept above 6.3 million-6.7 million tons.
BHP2020's fiscal year target production is 273 million-286 million tons, and the target guidance for fiscal year 2021 will increase to 276 million-286 million tons. BHP2020's second-quarter production and sales report showed that total iron ore production in the first half of the year was 144 million tons, up 7 per cent from a year earlier, and total sales in the first half were 145 million tons, up 8 per cent from a year earlier. The production and operation rate of S11D reached the level of 91 million tons per year in June and is likely to increase in the second half of the year, with annual production expected to be slightly more than 85 million tons.
The production and transportation of FMG are stable and the efficiency has been improved. In fiscal year 2020, the target shipping volume will be increased from 170 million-175 million tons to 175 million-177 million tons, and the shipping volume in the second half of the year will be higher than that in the first half of the year. In addition, a total of 70 million tons of new production capacity of BHP and FMG are gradually put into production in the new fiscal year, and production and sales are expected to increase further.
For Brazil, total shipments in Brazil in the first half of the year were 145 million tons, down 7.9 per cent from a year earlier. However, with the end of fiscal year 2020, given the low shipments in the first half of the year, there may be some additional shipments in the new fiscal year to make up for the previous gap. Recently, Brazilian shipments have basically returned to the level of the same period last year. It should be noted that the current epidemic situation of new crown pneumonia in Brazil is still relatively serious, and there is some uncertainty in the follow-up iron ore shipping volume.
Overall, from January to June 2020, China imported 547 million tons of iron ore and its concentrates, compared with 499 million tons in the same period last year, an increase of nearly 48 million tons over the same period last year. The proportion of foreign ore shipments to China rose sharply in the first half of the year, while the amount of iron ore coming to Hong Kong outside mainland China fell sharply. At present, it is difficult for overseas regions to have a big increase in iron ore demand in the short term, which also means that more foreign ore shipments will enter China.
Port inventory stops falling
From the seasonality of iron ore port inventory, the first half of the year usually belongs to the destocking stage, and the second half is the inventory increase stage. The decline of port inventory in the first half of this year is relatively obvious. At the beginning of the year, port inventory still stood at 125 million tons. In mid-June, the inventory has dropped to 107 million tons, a decrease of 18 million tons. This inventory level is also the lowest in the same period in nearly four years. It is mainly due to the contraction of foreign mineral supply and strong domestic demand in the first half of the year. Port inventories are starting to pick up, rising to 110 million tons at 45 ports as of July 17. In view of the fact that there will be a certain increase in foreign mineral supply in the second half of the year and the resilience of domestic demand, the port is expected to get rid of the low inventory situation.
Strong demand resilience
Due to the rise in raw material prices, the profits of domestic steel mills have shrunk, falling to the low level of the profit curve in the past three years. At the same time, increased efforts to protect the environment, the Tangshan Steel Plant limited production in July, hot metal output fell from a high, ending 17 consecutive weeks of rising output since the end of February. Analyzing the iron ore demand in the second half of the year, on the one hand, the continuity and enthusiasm of the production of long-process steel mills will maintain the toughness of iron ore demand; on the other hand, there will be heavy rain in this year's Meiyu season and will face high temperature in summer after the end of the rainy season, which is not conducive to construction, strong steel prices are difficult to maintain, and downward pressure will also be transmitted to other varieties of black series.
In short, the strongest period of iron ore prices has passed, and the space above is limited.
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