According to China Metallurgical news, in the past July alone, China's iron ore imports fell 21.4% over the same period last year, only 88.5 million tons. In the second half of the year, under the "double control", China's iron ore import is expected to decrease by more than 150 million tons year-on-year. Reducing iron ore imports can be said to be a blow to international iron ore exporting countries.
From the perspective of China's procurement channels, Australia accounts for 70% of them, and Brazil's export volume is 20%. In December 2020, Australia's iron ore export reached about US $9.67 billion, which has set a new historical record. The price of iron ore continues to rise. In 2021, BHP Australia expects the net profit to reach 168.2 billion yuan, a full increase of 80% compared with 2020, It can be said that he made enough money with monopolized resources.
According to foreign media, on August 3, 2021, Brazil's official data showed that Brazil's iron ore export in July 2021 decreased by 6.6% year-on-year, and the total iron ore export was 31.73 million tons. Compared with the same period in 2020, Brazil's iron ore export decreased by nearly 2.25 million tons. According to industry analysis, this is related to China's iron and steel production reduction, capacity reduction and gradual reduction of overseas iron ore imports. Reducing the amount of imported iron ore abroad can help reduce the disorderly demand for iron ore and guide the iron and steel industry to gradually upgrade and transform. Then someone has to ask why China should limit the production of steel? In general, it can be said that it is related to the development prospects of the market and industry.
Butterfly Effect
The reason for the matter has to start with a butterfly shaking its wings in America. Since 2020, the United States has indiscriminately issued dollars, sold U.S. debt and passed on the debt crisis. Moreover, the "country sitting on the harvester" followed the eldest brother of the United States to raise the price of iron ore to deal with the release of water from the U.S. dollar against China. With the price of iron ore with almost monopoly advantage, the price of iron ore has risen outrageously. It is conceivable that as a result, the prices of many commodities, including steel, have soared, and inflation has become the main theme of Global trade.
If China does not adjust the iron and steel industry, it will inevitably lead to vicious competition among domestic iron and steel enterprises and serious overcapacity of iron and steel. At that time, China, as a large iron and steel exporter, will have the risk of stealing economic achievements by the United States and being "cut leeks" by the US dollar.
Iron ore prices have risen by more than 100%
According to the website of the General Administration of Customs on August 7, in the first seven months, China imported 649 million tons of iron ore, a decrease of 1.5%, and the average import price was 1116.1 yuan per ton, an increase of 69.5%. Over reliance on imports, even if the price is super high, the steel mills with demand will choose to accept it. In 2009, such a problem had already occurred, because at that time, China was extremely dependent on imported ore, and the world's three major mining giants monopolized the world iron ore market, proposed to increase the price by 100%, and required to change the original long-term negotiation price to short-term negotiation price. Such a change would also make China pay more money for iron ore import, However, iron and steel enterprises with funds will still yield to the demand for raw materials and continue to cooperate. However, the steel plant products have high added value and can easily absorb the increase in cost, so the impact is limited. It is the downstream industries of these iron and steel enterprises that really bear the pressure of price rise. For example, the fastener manufacturing enterprises in them will bear the pressure brought by the price rise of iron ore due to the large proportion of iron and steel raw materials in their costs.
Change the status quo and take multiple measures at the same time
Since the middle of July this year, China has released the goal of reducing the output of steel enterprises in all provinces. Reducing the output of the steel industry is one of the direct ways to reduce the demand for iron ore. The reduction of iron ore demand also has a downward impact on the iron ore price at the end of the supply and demand lever. According to the iron ore price index released by our iron and steel network on September 1, 61% of the iron ore price index fell below 140 US dollars, the domestic steel market price fell, and the ex factory price of Tangshan billet fell by 20 to 5000 yuan / ton. By reducing production and capacity, eliminating some unqualified steel enterprises, maximizing efficiency, optimizing China's industrial structure, and directly reducing carbon emissions, it can be said to be a bold attempt on the road of "carbon peak and carbon neutralization".
In addition to the reduction of steel production, which is bound to weaken the demand for imported iron ore, China's iron ore import is expected to decrease by more than 150 million tons year-on-year under "double control" in the second half of the year. In addition, China is also making efforts not to rely too much on imported iron ore. on August 16, China won the mining right of Simandou iron ore! Simandou iron mine is estimated to produce about 5 billion tons of iron ore resources, which means that China will not be afraid of getting stuck in importing iron ore in the international community in the future. With the combination of multiple measures, the demand for iron ore in China will decrease significantly month on month and year-on-year, while the supply of mainstream iron ore will increase month on month. In this way, iron ore prices are expected to fall further and remain within a reasonable range. The cost price of steel mills that optimize the industrial structure is reduced, and the false high steel price is alleviated. In the downstream industries of iron and steel enterprises, such as fastener manufacturing enterprises, they can release the capital pressure of raw materials, increase production, drive the development of manufacturing industry, and further promote the prosperity of the middle and lower reaches of the industrial chain!
