Both internal and external factors drive iron ore up 6.83% steel plate strength [SMM analysis]

SMM3 March 3 News: black continues to strengthen in recent days, affected by the pull, the iron and steel plate is stronger today, Oriental Iron Tower, Hainan Mining, Maanshan Iron and Steel shares, Xinxing cast pipe, Fangda Special Steel, Youfa Group, Xinshan Iron and Steel shares are among the top gainers.

At this stage, the industry-wide turmoil caused by the conflict between Russia and Ukraine is the main reason. Ukraine and Russia are important suppliers of black goods in the world. Affected by the war, the steel exports of Ukraine and Russia have been affected. Russian steelmaker Severstal reportedly said it had suspended supplies to the European Union because of Western sanctions against its shareholders. Overseas steel supply is tight, so there is indirect support for China. And with the gradual pick-up of infrastructure and construction sites around the country, downstream demand is improving, which also has a pulling effect on the iron and steel plate.

In addition, the pulling and supporting function of the raw material side still exists. Iron ore, coking coal and coke all rose in varying degrees.

Iron ore, in particular, rose sharply in the main contract today, rising more than 8% at one point. By 15:00, iron ore was up 6.83%. Today, the spot price of imported iron ore port rose sharply, which is expected to rise by 40 per cent and 50 yuan.

"Click to see the trend of iron ore futures.

According to SMM, the surge in iron ore futures today is mainly due to the escalation of the conflict between Russia and Ukraine, which has affected the production and export of Russian and Ukrainian steel mills. At present, large steel companies such as Metinvest and ArcelorMittal have suspended the export of rolled steel to the European Union. At the same time, production restrictions in Tangshan area during the two sessions fell short of expectations. And in the first quarter, the shipping volume of Australia and Brazil decreased seasonally, especially the short-term rainfall in Brazil affected the production and transportation of iron ore, and the shipping volume was on the low side. In addition, the marginal increase in iron ore demand and the replenishment of steel mills have supported the price. However, the spot supervision of iron ore period is still relatively strong, chasing high still needs to be cautious.

Institutional point of view:

Warburg Securities: steel supply and demand overseas tightening, domestic steel prices indirectly or supported. The European Union is an important destination for the export of Ukrainian and Russian steel products. Since July 2021, EU steel prices have dropped sharply. At present, the manufacturing PMI index of EU economies is high, the conflict between Russia and Ukraine has a great impact on the production and trade of Ukrainian steel enterprises, and financial sanctions have an impact on the export trade between Russia and Europe. The hindrance of steel exports from Russia and Ukraine will promote the tightening of steel supply and demand overseas, especially in the EU region. Affected by this, EU steel prices may have rebounded. Considering that there is a price difference of 183 US dollars / ton, 314 US dollars / ton, 357 US dollars / ton and 319 US dollars / ton between domestic rebar, medium and heavy plate, hot-rolled plate, cold-rolled plate and EU, the internal and external price difference may increase, which will provide good support to the domestic steel price.