Iron ore price: old injury under the new height

Abstract In the beginning of the new year of 2011, the spot price of iron ore broke through 190 US dollars / ton, setting a record high for the year, and it is very likely to break the $200/ton mark this week. The iron ore spot transaction price has a record high of $205/ton, which is...

At the beginning of the 2011 New Year, the spot price of iron ore broke through 190 US dollars / ton, setting a record for the year, and is likely to break through the $200/ton mark this week.

The iron ore spot transaction price has a record high of $205/ton, which was in the first half of 2008. That year, the global sea freight rate soared, with a record high of more than $100/ton, accounting for almost half of the mine price. At present, the sea freight cost of Brazilian iron ore to China is less than 30 US dollars / ton.

According to the "real reflection" of the market supply and demand situation, such spot price means that under the quarterly pricing model, the mine price in the first half of the year will remain high, and the pressure on raw material costs of steel enterprises will continue to rise.

This old scar that has plagued the Chinese steel industry for several years will continue to hurt.

In 2010, China imported 618.6 million tons of iron ore, a decrease of 8.99 million tons from the 627.6 million tons in 2009, a decrease of 1.4%. This is the first time since 1998 that China’s imported iron ore has fallen year-on-year.

This is a result of the Chinese camp, including the China Steel Association, which is very motivating. The obvious substitution role of domestic mines has become a favorable card for Chinese in the Chinese and foreign games.

However, in addition to the "quantity decline", the reality of "price rise" is still in the throat, and it is even more plugged.

Because the average price of iron ore imports in 2010 was US$128.4/ton, which was 59.5% higher than the average land price of US$79.9/ton in 2009. The annual import of iron ore was US$79.427 billion, which is higher than that of 2009. The annual value of 50.147 billion US dollars increased by 29.28 billion US dollars (about 195.3 billion yuan), and the average price increased by 60.6%.

Why is the import volume decreasing and the price rising?

This problem may not be asked about the mine. This is the most desirable result of the ore supplier, which proves that it has a good degree of operation and great success.

Moreover, the mines believe that it is a high challenge to ensure the market supply by full-scale horsepower, because the expansion of production means not only a huge amount of capital investment, but also a series of potential risks from exploration, mining and transportation.

Some people in the mining industry pointed out sharply that, in fact, the operating difficulties of individual steel companies, and even the entire industry and its meager survival, are not enough to form a starting point for the miners to consider. Because, you don't need to think so carefully.

"As long as China's urbanization process continues, China's overall economic development will remain stable, so the steel and iron ore used must meet a certain amount," the source said.

Sheng Zhicheng, the information director of the domestic steel spot trading platform "Xiben Shinkansen", has sorted out such a "vicious circle" to reporters:

“Domestic steel prices and mineral prices push each other higher. The end result is that domestic high-mine prices are being paid, and high steel prices will form a profit bubble for a period of time, stimulating the full release of domestic steel production capacity, thus releasing more iron. Ore demand. For the domestic steel industry chain, due to the instability and uncertainty of demand, after the high steel price burst, the rest of the country only has high mining price, low steel price and lower profit. The environment will deteriorate further. The steel companies in the terminal are more likely to pay for high costs, and the steel companies themselves will not get a lucrative profit."

China's steel industry's appeal for the rational distribution of profits in the upstream and downstream industry chain seems to be getting farther and farther away from the goal, unless there is a major turning point in the relationship between supply and demand.

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