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[SMM monthly special topic] September black series or differentiated operation of steel products to continue the upward trend of iron ore has been suspended.
Sep 2,2020 16:22CST
translation
Source:SMM
Looking forward to September, we think that the overall black market is more optimistic, steel prices are expected to continue to rise, hot rolls or bright varieties. In September, the fundamentals of supply and demand in the iron ore futures market became weaker than the previous month, and the price or maintained a high range of shocks.
The content below was translated by Tencent automatically for reference.

SMM9 March 2: the overall black market in August continued its previous upward momentum, with the first half of the thread fluctuating upward due to the release of demand after the rainy season and rising factors such as iron ore. The threaded rb2101 contract rose to an one-year high of 3803 yuan / ton on August 19, while it fluctuated downwards in the second half of the month. The last trading day of August closed at 3779, up 4.19%. Iron ore also rose first and then fell in August, closing at 844 on the last trading day, a monthly increase of 10.47%. Hot volumes rose almost all the way up, with the last trading day of August at 4011, up 4.24% on a month-on-month basis.

In August, the macro environment continued to warm up, the domestic capital market rose across the board, and the futures market rose synchronously under the influence of the linkage of stock and futures periods. Steel prices strongly pull up, terminal and speculative procurement is active, the market transaction is more hot. From mid-August to mid-August, due to the slow release of terminal demand affected by high temperature, the pressure on the supply side is gradually increasing, and the market fear of heights intensified, so the black system as a whole peaked and fell back in the middle and late ten days. Near the end of August, the news of Tangshan environmental protection production restrictions again, the futures market has a certain boost, prompting threads, hot rolls to open the short-term rising market.

Looking forward to September, we believe that the overall black market is more optimistic, steel prices are forecast to continue to rise, but the thread range may be relatively small. Because although the strength of the raw material end price continues to "tamp" the bottom support of the spot price, and there is also a slight decline in the supply side of building materials under poor profitability, when the strong demand expectation has not been realized for a long time, the inventory is still high. this will suppress thread prices to be difficult to sustain or rise sharply; while the fundamentals of hot rolling are relatively healthy relative to other varieties, superimposed steel mills are willing to push up prices and have a strong upward momentum. In addition, the impact of production restrictions is still on the news surface, the substantive documents have not been published, and the later impact remains to be seen.

In terms of iron ore, on the supply side, the port pressure in some ports has gradually eased recently; superimposed on the fact that weekly outbound shipments in Australia have maintained a steady upward trend since mid-late August, Brazilian shipments have continued since late July and are expected to increase one after another in September, and port inventory is still expected to return to accumulation in the later period.

It may be difficult to see a further increase in demand. After entering September, strict production restrictions on environmental protection are still expected in Tangshan area. In addition, the current situation of high domestic steel inventory has not been alleviated, in the case of certain pressure on steel prices, steel production and raw material procurement enthusiasm are not high, both profit and empty iron ore future prices. However, with the recent slight rebound in steel mill profits, it is difficult to significantly improve the spot structural problems of the superimposed port in the short term, and iron ore prices are also strongly supported.

Therefore, although the fundamentals of supply and demand in the iron ore futures market in September are weaker than the previous month, prices may remain high and fluctuate mainly.

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