Demand is still strong in 2021? Iron ore prices set a new record high, but the agency sees it this way.

SMM News: on Thursday, iron ore futures rose again, the 2101 contract hit a new high, approaching the 900 yuan / ton integer mark, the forward 2105 contract rose more than 2101 contract. Night trading, iron ore futures continue to remain strong, the main 2101 contract up to 906.5 yuan / ton, closing at 904 yuan / ton, a new high.

The recent strength in iron ore prices is mainly due to optimistic expectations of the global economic recovery. After entering the fourth quarter, the resumption of production on the global production side is good, and the demand for replenishment of raw materials continues to increase. " An industry source, who spoke on condition of anonymity, told reporters that this year, due to the impact of the COVID-19 epidemic, a large number of production enterprises passively cut production and stopped production, and global steel production outside China also fell sharply. According to the latest data released by the World Steel Association, the cumulative global crude steel output from January to October 2020 was 564 million tons, a decrease of 79.85 million tons compared with the same period last year. However, it should be noted that the low point of global crude steel production occurred in the second quarter, continued to recover from the third quarter, and accelerated since October. The latest monthly crude steel production in other countries except China was 69.7 million tons, which is already higher than the level of 69.47 million tons in the same period last year. The rapid recovery of global steel production capacity will lead to a stronger overall iron ore demand, thus boosting the optimistic expectations of the market for forward contracts.

"the main driving force behind the current rebound of iron ore comes from two aspects: first, the stronger-than-expected strength of timber consumption in November has significantly alleviated the pressure on high stocks in the early stage, and the continued rise in timber prices has formed positive feedback on the price of iron ore at the raw material end. The second is to open the basis repair market, with the continuous improvement of the profit level of steel mills, its willingness to take the initiative to replenish iron ore gradually increases, promoting the spot price of iron ore to strengthen, and under the drive of high basis difference, the price of the disk accelerates to move closer to the spot. " Founder medium-term futures iron ore researcher Liang Haikuan said.

Australian iron ore exports reached an all-time high of A $10.9 billion in October, accounting for 36 per cent of Australia's total exports in October, supported by growing demand for iron ore in the Chinese market, according to figures released by the Australian Bureau of Statistics ((ABS)) on November 24th. Australia's iron ore exports rose by $833 million, or 7 per cent, in October from a year earlier. In the month, Australian exports rose 6 per cent year-on-year to $30.5 billion.

Australia's iron ore exports rose sharply in October, mainly supported by strong demand from China. Most of its metal ore exports are iron ore exported to China, accounting for about 80% of the total export value, far surpassing Japan and South Korea. " Blanco Vitas (Branko Vitas), head of international data statistics at the Australian Bureau of Statistics.

Analysts said iron ore prices rose above $130 a tonne this week, a two-month high, and continued to be bullish on the performance of Australian iron ore producers in November.

It should be noted that the current spot price of iron ore is at the high level since January 2014, considering that under the background of the current serious global epidemic, there may be some uncertainty in economic recovery. in order to deal with this possible uncertainty, the current relatively high mineral prices also provide a certain margin of safety for enterprises to hedge and avoid risks.

For the future, Vanguard Futures-related analysts believe that the main factor determining iron ore futures price is the improvement of the downstream demand end, with the gradual entry into the deep winter, production restrictions in the heating season may become stricter, blast furnace operating rate and daily average hot metal will enter a seasonal decline, downstream demand shows a near-worry-free, far-worried pattern, iron ore futures prices in the fourth quarter may maintain a weak oscillation pattern.

Relevant experts pointed out that at present, there are corresponding futures varieties from finished steel to raw materials, which provides a good environment for iron and steel enterprises to hedge, which is a general trend and directly affects the competitiveness of iron and steel enterprises. Iron ore futures price is becoming more and more representative of supply and demand in the spot market, and has become an important reference for spot trade pricing, which effectively helps many enterprises to lock in raw material costs and production profits and complete price risk hedging.

Relevant market participants said that if iron and steel enterprises want to avoid the risk of substantial fluctuations in raw material prices, hedging in the futures market is undoubtedly important and necessary. If iron and steel enterprises do not participate in futures, it is not only giving up the opportunity to hedge risks, from a higher level, the degree of participation of enterprises in the futures market is not high, they will not be able to better voice and reflect the "voice" of iron and steel enterprises through the futures market. Let the market rise and fall and can only passively accept it. Therefore, steel mills should know more about and study futures.

Considering that the current iron ore futures price has reached 900 yuan / ton, the price may face a pullback in the case of uncertain changes in supply and demand, the hedging strategy of industrial enterprises should be followed up and adjusted in time to seize the opportunity to better protect production and operation with the help of futures tools.