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Tangshan due to the epidemic to re-control the supply and demand storm and iron ore prices can ripple? [SMM analysis]
Apr 18, 2022 18:25CST
Source:SMM
SMM analysis: can iron ore prices ripple once again due to the epidemic in Tangshan to control the supply and demand storm? The iron ore market continued to fluctuate today, rising more than 1% after a smooth red in early trading, then fell back to close by 0.88% to 922 yuan / ton. On the news side, affected by the epidemic situation in the surrounding areas, since 00:00 on April 18, Qian'an, Qianxi, Luanchuan and Guzhi District of Tangshan City have once again implemented recovery control. SMM believes that the impact of the Tangshan closure on iron ore is limited. At present, many steel mills in Tangshan have applied for permits to ensure the normal transportation and supply of iron ore.

SMM4 March 18: today's iron ore market continues to fluctuate, after a smooth red in early trading, rose more than 1% at one point, and then fell back to close, up 0.88% at 922 yuan / ton.

"Click to view the real-time market of iron ore futures.

The price in the port spot market was stable in early trading compared with last Friday. Some traders are active in shipping; steel mills are more cautious and wait-and-see today, and their purchasing enthusiasm is not high. The overall transaction atmosphere in the market is deserted. Overall transaction prices rose steadily.

On the face of the news

Affected by the epidemic situation in the surrounding areas, since 00:00 on April 18, Qian'an, Qianxi, Luanchuan and Guzhi District in Tangshan City have been cured again, with further notice of the contact time.

Last week, the Central Commission for discipline Inspection said it would strengthen supervision and law enforcement in response to the sharp rise in prices such as iron ore and thermal coal.

Fundamentals:

On the supply side, due to seasonal factors in the southern hemisphere in the first quarter, overseas shipments were generally low, Australian and Brazilian shipments recovered slowly, and iron ore port inventories are expected to enter a continuous downward channel. At present, the amount of iron ore arriving at the port remains low, and the supply is in a period of tension. In addition, domestic and foreign iron ore prices hang upside down, domestic steel mills prefer to purchase port spot, so in the short term, the port will enter the rapid depot stage, giving certain support to mineral prices.

From the demand side, the epidemic situation in Binzhou, Shandong, Tangshan, Hebei, and Anshan, Liaoning, and other places has improved, and the shortage of raw materials has slightly improved. The production of steel mills has recovered slowly, and the output of hot metal has increased, driving the demand for iron ore. However, taking into account the backlog of steel mills inventory, superimposed profits and losses, squeeze iron ore prices.

Blast furnace operating rate, as of April 15, SMM statistics of the blast furnace operating rate of 82.39%, cycle-to-cycle increase of 0.44%, month-on-month increase of 0.82%.

The operating rate of the blast furnace in this period is slightly higher than that of last week, mainly due to the resumption of production of some blast furnaces stopped due to the epidemic, and the resumption of production this week after the completion of maintenance of individual blast furnaces. According to SMM research, at present, the epidemic situation is spreading in China, and the influence degree of the epidemic situation is different in different places. A total of 28 blast furnaces have been shut down one after another by the epidemic, of which 15 have resumed production and the average daily output of hot metal has been restored to 57000 tons. 13 are still in a state of suspension, with an average daily impact of 52500 tons of hot metal.

To sum up, SMM believes that the impact of the Tangshan closure on iron ore is limited. At present, many steel mills in Tangshan have applied for permits to ensure the normal transportation and supply of iron ore, and the demand for iron ore is stable in the short term. Considering that the profits of steel mills are already at a loss and the coke has been raised in the sixth round, once the profits of steel mills hit the ground will shrink again, there is a risk of production reduction. And cut reserve requirements, interest rates are expected to land in the near future, real estate and other downstream industry demand is expected to improve, good steel prices. It is expected that iron ore prices will fluctuate mainly in the short term.

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