Supply and demand loose pattern of iron ore futures will continue to be weak

Since peaking in July, iron ore futures and current prices have both fallen.After a rally in late September and early October, it resumed its decline and recently hit a low for the year.A number of industry insiders said in an interview, in the short term iron ore oversupply situation is difficult to change, futures prices will remain weak operation.

Loose supply and demand pattern is difficult to change

Recently, iron ore prices have fallen sharply, with the Platts index falling from $120 / ton at the end of October to less than $100 / ton.In the domestic futures market, the main contract of iron ore futures hit 552.5 yuan/ton on November 5, hitting a new low since the end of April 2020. By the end of November 8, the cumulative decline of this month is 10.51%.

For the recent weak performance of iron ore, In yan Futures investment consulting department researcher Wang He believes that the direct reason is the overall supply and demand pattern loose.However, due to China's high dependence on foreign iron ore, and the main source of import??The transport volume of the four mines is generally stable and in a reasonable range in previous years, so the fundamental reason lies in the demand side.

He believes that it is expected that steel later replenishment demand or limited, steel mills continue to maintain low inventory status, based on the on-demand procurement strategy, and then affect the demand for iron ore.In addition, the actual demand and expected demand of steel terminal deviation, steel profits compression, the price of the whole industry chain are moving down.

Xu Huimin, a black senior analyst at Topix Derivatives Research Institute, said on the supply side, some non-mainstream goods started to squeeze out when iron ore prices were around $120 per ton, but not as much as the decline in demand.On the demand side, the production of hot metal from 247 steel mills nationwide is expected to remain at a low level of 2.1 million tons/day to 2.2 million tons/day.Overall, excess iron ore in October reached 15%, corresponding to the end of the port iron ore inventory is expected to reach 190 million tons.

Yao Xinghang, manager of jinxin Futures Investment Consulting Department, agrees.He explained that pig iron production in The july-September period was down 10% from a year earlier, while iron ore supply remained basically stable.In the early stage, due to the high price of iron ore, both domestic and foreign mines maintained high output and high operating rate. The contradiction between supply and demand began to emerge and ferment in July, and has continued until now.

Prices will remain weak

For the market, the industry agreed that subject to their own weak fundamentals, iron ore futures will continue to run weak.

Yao Xinghang said that the current iron ore prices have not yet bottomed out, the market will continue to fall concussion pattern.

"Steel production limit probability continues to be strict, thus suppressing iron ore demand in the long term, so the probability of the mine price will be weak shock."Wang he told reporters.

Xu Huimin said that the current 85% cost line of iron ore corresponding to 80-90 DOLLARS, equivalent to the disk after the cost support of about 520 yuan/ton.The terminal discount is difficult to pick up significantly, the supply side is continuing to squeeze out, iron ore is expected to maintain a weak long-term fundamentals.Once prices fall near marginal cost, however, the overall downside is limited.