Yu Chen: The implementation of limited production did not discuss the iron ore to fall through the "bottom"!
Yu Chen Shu Shanghai Steel 300226, e-commerce Co., Ltd. attending stocks of iron ore analyst
Yu Chen, senior analyst of Mysteel Iron Ore Division, has been engaged in black market research for six years. He has been responsible for research on foreign mine shipments, steel mill blast furnaces and inventory, and has been recognized by the market as an important reference. Indicators; and participated in many large-scale research projects, and studied the black supply and demand fundamentals.
Core view
1. From the point of view of the limited production rhythm, many provinces are strictly demanding the implementation of the production restriction policy, including the intensity of implementation, not all starting from November 15, and some have even started ahead of schedule. The rhythm of limited production is actually ahead of schedule.
2. For the steel price, we are more optimistic that the impact of supply after the implementation of limited production is greater than the impact of demand. From this aspect, the material is more optimistic than raw materials.
3. If the post-production period is implemented on a large scale, we have previously estimated that the limited production season will affect at least the demand of 4-5 million tons of iron ore, which will definitely cause the price of iron ore to fall below the low of the previous period of 55 US dollars.
4. The spread of the port has been easing since September. On the one hand, it has a certain relationship with the limited production of steel mills; on the other hand, it also has a certain relationship with the sales of high-end mines such as Rio Tinto and BHP, which makes the high-quality mines not in short supply. .
5. It is necessary to focus on how many marginal cost mines will be squeezed out of the market during the price decline, and this part will be withdrawn from the new equilibrium position of the ore.
Complete interview content
Bulk internal reference: Entering into mid-October, an environmentally-friendly production restriction policy has been implemented in some parts of the north. What is the specific rhythm of production restriction?
Yu Chen: At present, the first implementation is the 邯郸 area, which will be implemented from October 1st. We understand that the latest situation is also limited in the area according to the documentation requirements. Other regions have not yet started the production restriction measures, and there is not much change in production and supply.
In addition, Tangshan City issued a document yesterday requesting that the entire sintering and shaft furnaces should be limited to 50% from the early hours of the morning, and the temporary blast furnace has no production limit. However, from the point of view of the document, the production limit plan for the blast furnace has been studied and will be announced after the completion of the formulation. Therefore, from the point of view of the limited production rhythm, many provinces are strictly demanding the implementation of the production restriction policy, including the intensity of implementation, not all starting from November 15, and some have even started ahead of schedule. The rhythm of limited production is actually ahead of schedule.
Bulk internal reference: What is the current inventory of steel? Some people think that the fundamentals of the material are not too bad, and the steel price has certain support. What do you think of this?
Yu Chen : It is true. For the steel price, we are more optimistic. The impact of supply after the implementation of limited production is greater than the impact of demand. From this aspect, the material is more optimistic than raw materials. From the perspective of post-holiday inventory, it is still in a relatively normal state. Every year after the National Day, there will be a certain accumulation, including this year, there is a certain accumulation, but still in a normal state.
From the latest inventory situation today is not bad. The inventory in the factory is in a state of small decline, and the inventory of the society is in a state of growth. On behalf of the market, the demand for replenishment is still relatively optimistic. After the traders have sold goods through the National Day, there is not much inventory, and there is a certain intention to replenish the library. During the National Day, there was a certain accumulation of inventory in the factory, which also had a certain relationship with the delivery of thread in October. If you want to see the details of the next week's inventory, it will be clearer.
Bulk internal reference: At present, the price of iron ore has fallen below 60 US dollars. So what is the downside of subsequent iron ore, will it break through this year's low?
Yu Chen : In the short-term, before the limited production is not implemented on a large scale, 60 US dollars is a relatively balanced position of iron ore . It can be seen that the decline of iron ore is not particularly large, and the movement on futures is relatively large, but it is relatively relatively in stock. Gentle. This year we calculated the iron ore balance point is around 60 US dollars . In March this year, the low point of iron ore fell to 55 US dollars. At that time, the discount for low-grade mines was 27%, and the corresponding price was about 46 US dollars. . At present, the discount of 60 US dollars super special powder is 40%, and the price of super special powder is only 36 US dollars. Therefore, from the perspective of low-grade mines, it has fallen below the lowest level this year. For the mainstream low-grade ultra-fine powder, Indian powder, etc., 36 dollars is close to its full cost, and they already have certain sales pressure.
Therefore, if short-term production is not implemented on a large scale, it will not support a sharp drop in ore for the time being. However, if the post-production period is implemented on a large scale, we have previously estimated that the limited production season will affect at least the demand of 4-5 million tons of iron ore, which will definitely cause the price of iron ore to fall below the previous low of 55 US dollars, as low as Where, it depends on the specific market conditions to analyze.
Bulk internal reference: It is reported that some mines in the northern part of China also have certain restrictions on production. What are the specific reasons and scope of the impact? If iron ore prices continue to fall, what impact will it have on the supply of non-mainstream mines?
Yu Chen : At present, the domestic mines are mainly due to environmental protection and the “Nineteenth National Congressâ€. The mines around Beijing restrict the use of explosives, and the impact on open pit mines is relatively large. We have specifically learned that the impact is mainly due to the greater impact of Shanxi, and Chengde, a small part of the northeastern region is also affected. However, most of the mines will have a certain amount of raw ore reserves before the “Nineteenth National Congressâ€, and they will not have much impact on the production and supply of their fine iron powder in a short period of time.
In terms of price, the average cost of mines in non-mainstream mines, especially some small private enterprises in China, is relatively high. The average cost announced last year was $54. When the price fell to 55 dollars in March this year, some small mines in Anhui, Northeast, Shandong and other places were related to the stop. Therefore, once the production limit is implemented, the price of the mine falls below the previous drop point, which will inevitably lead to the withdrawal of production capacity of this part of the mine. At present, steel mills have been pursuing high-quality mines to increase the production of molten iron, so the discount of low-grade mines must be More powerful than in March this year. Therefore, the impact on the low-end non-mainstream mines is very large. However, when the price of the mine falls to a certain extent, this part of the mine will withdraw from the market and will have a certain mitigation effect on the overall supply.
Bulk internal reference: What is the price difference between iron ore varieties and the iron ore inventory structure of the port?
Yu Chen : The spread of the port has been narrowing. The price difference between PB and Jinbuba powder between high-grade powder and PB and ultra-fine powder between high and low grade powder has gradually eased since September.
On the one hand, it has a certain relationship with the limited production of steel mills; on the other hand, it also has a certain relationship with the sales of high-end mines such as Rio Tinto and BHP, which makes the high-quality mines not in short supply. . The front has also improved, low-grade mines are far below the lowest point of the previous year, and there is still a certain downside for high-grade mines, so the price difference between high and low products may be narrowed.
Bulk internal reference: What should we focus on in the follow-up?
Yu Chen : For iron ore, it is necessary to focus on the number of marginal cost mines that will be squeezed out of the market during the price decline. This part of the volume will be removed from the new ore position.
In terms of materials, we must pay attention to downstream demand, and the differences between the long and short sides of the market are relatively large. The bulls believe that after the end of the winter limit, the supply will be reduced more than the demand, then there will be a certain chance. The anti-party believes that the demand in the fourth quarter will be weak. After the fourth-quarter production limit, the demand in the north will be weakened, which will affect the demand of the entire industry chain. It may not be that the demand reduction is greater than the supply reduction. Therefore , the changes in the late demand side require everyone to pay attention.
Bulk internal reference position data: iron ore 1801
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