Iron ore price reduction and steel price reduction

For steel mills, the good news comes with the bad news. The good news is that the iron ore price has finally loosened in the first three quarters, and the bad news is that the steel price has also dropped. That is to say, the profit is still so much. This year, the biggest factor affecting the steel plant's revenue is the increase of iron ore price. There are problems in Brazil and Australia, the two main producing areas. The former has tailings accident, and the latter has hurricane disaster. The iron ore production has declined sharply, while the demand from China has increased strongly. According to the monitoring of CISA, at the end of September, China's steel price index (CSPI) was 106.09 points, down 0.96% compared with the beginning of the year, down 15.55% year on year, and the CIF price of imported iron ore of ciopi increased 30.31% compared with the beginning of the year, up 22.07% year on year.

The situation in the first three quarters is that steel prices have basically not changed, while the cost of raw materials is mainly the rise of iron ore, so many steel enterprises blame the decline of profits on the rise of iron ore prices. For example, the performance forecast of the first three quarters of 2019 issued by Angang Steel shows that the net profit of the first three quarters of 2019 is about 74.88% lower than the same period of last year. One of the reasons that Angang Steel explains is the international mining industry. The dam break of Mountain Giant vale. TISCO stainless steel expects net profit to decline by 58.14% to 50.75% in the first three quarters for the same reason as Angang Steel. In the first three quarters, steel mills and industry associations were discussing plans to deal with the rise of iron ore prices. Now there is good news. Rio Tinto, an Australian iron ore giant, said in October 16 that its iron ore output in the third quarter reached 86.1 million tons due to the increase of demand from Chinese buyers, up 5% year on year. Rio Tinto's confidence was boosted, and it also predicted that iron ore shipments could reach 320 million to 330 million tons this year. In the third quarter of this year, Vale's iron ore production rose 35.4% month on month to 86.7 million tons. Brazil has also restarted production, with iron ore production recovering faster than expected. Last month, China's iron ore import reached 99.13 million tons, the highest level since January 2018, and the port has reached 120 million tons. The situation of iron ore tension has eased.

The iron ore giant moves rapidly, and the iron ore price falls in response. If the steel price does not change, the steel mills will start a big profit model. Unfortunately, the steel price has also dropped, and the screw steel has been depressed in recent two months, and has been falling in recent two weeks. Despite the rising trend of inventory, the steel plant has no power to limit production, so it can only suppress the price of coke, another important raw material. After all, the steel plant is still strong, so the price of coke has declined, but on the other hand, the profits of coke enterprises will be affected. In recent years, once the North has entered a cold winter, many analysts expect the government to limit production due to environmental protection, so that steel prices can recover. In the past few years, because of the environmental protection problem, the steel price has rebounded, and the life of the steel plant has not been difficult. However, in recent years, there has been continuous news of capacity withdrawal. For example, Hebei, a major steel Province, will withdraw 14 million tons of steel capacity by the end of the year. Of course, China's steel production is still growing rapidly, accounting for half of the world's total. The steel demand from the terminal is continuously increasing, which has successfully digested the increase in production of the steel plant.