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Fundamental pressure gradually showing iron ore future how to interpret?
Sep 27,2020 08:04CST
translation
Source:Futures daily
The content below was translated by Tencent automatically for reference.

SMM News: this week the global financial market once again entered the risk aversion mode, which is a continuation of the hedge cycle in early September, due to the decline in inflation expectations caused by the exchange rate, which is a typical macro-cycle momentum switch from a macro point of view. At present, as most industries have resumed work, the margin of economic growth has weakened, while the marginal contraction of stimulus policies, the growth-led expansion has come to an end, and the overall performance of industrial products is still weak. The main 2101 contract of iron ore futures reached a high of 874 yuan / ton on September 3, and then under the guidance of pessimism that steel demand performance was lower than expected, rebar prices fell continuously in coordination with furnace charge. Superimposed with the weakening of iron ore fundamental data and the expectation of production restrictions approaching the heating season, the fluctuation range of iron ore is significantly greater than that of finished products.

The supply side of iron ore basically returns to a loose state.

Data show that from September 14 to 20, total iron ore shipments in Australia and Brazil decreased by 2.311 million tons month-on-month, including 585000 tons in Australia and 1.726 million tons in Brazil. The total arrival volume of 45 ports nationwide is 21.631 million tons, a decrease of 3.035 million tons compared with the previous month. Iron ore shipments from Australia and Brazil have basically returned to the high levels of the same period in previous years, and the volume of arrivals to Hong Kong has also remained at an all-time high level.

In terms of domestic mining, according to the data on Sept. 18, the average daily output of iron concentrate from 126 mining enterprises and 266 mines across the country is 431700 tons, and the capacity utilization rate is 68.43%, maintaining an all-time high level. The supply of iron ore inside and outside the country is gradually becoming loose.

Iron ore demand is still supported, but the margin has shrunk

Affected by the poor air quality in Tangshan since late August, in order to ensure the ambient air quality in Tangshan, the Tangshan municipal government has frequently issued documents on strict suspension and production restrictions, resulting in a marginal contraction in iron ore demand. According to the data, in the fourth week of September, the average daily hot metal output of 247 steel mills across the country decreased by 14900 tons from the previous month to 2.4938 million tons. The average daily hot metal output has declined slightly for six consecutive weeks, the utilization rate of blast furnace capacity has declined again, and the national blast furnace operating rate has declined for six consecutive weeks. It shows that the demand for furnace charge has shrunk marginally. In the first four days of this week, the daily average trading volume of iron ore major ports was once again lower than the average of last week, and the low profits of steel mills restrained the enthusiasm of traders to take goods. However, judging from the current absolute level of crude steel production and the contraction of blast furnace construction before and after the National Day last year, the current charge demand still has some support, unless the effect of stopping and limiting production measures can be more stringent than expected, otherwise, the current degree of loss is temporarily difficult to make steel mills have a continuous willingness to take the initiative to reduce production, so that iron ore demand will not be exhausted.

Summary

The change in the relationship between supply and demand of iron ore has gradually become clear, the supply has gradually returned to loose, and the current demand has gradually returned to normal in Hong Kong, and the current demand is still exuberant, but under the influence of the unoptimistic profit situation of steel mills and the expectation of production restrictions during the heating season, the demand gap is expected to rise higher. this week, port inventory has climbed again to more than 116 million tons, and the inventory of middle-grade powder, especially PB powder in the six northern ports of Diangang has rebounded rapidly, and the inventory pressure has become increasingly prominent. The gap between supply and demand of iron ore is expected to be strong.

The absolute spot price of iron ore remains high and the basis remains high. As of September 25th, the base difference of iron ore futures 2101 measured by gold Bubba powder is about 184yuan / ton, and that of iron ore futures 2101 measured by PB powder is about 197yuan / ton. Under the expectation of production reduction of steel mills and the tightening of financing of real estate enterprises, the iron ore base difference will most likely be repaired in the form of a sharp drop in spot, and it is difficult for short-term market sentiment to be significantly repaired. however, we need to pay attention to the reverse fluctuation risk caused by the replenishment of steel mills and the elimination of steel stocks at any time.

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