Iron ore stage low point or has appeared

The market panic about the outbreak has been fully released. With the gradual arrival of the marginal easing of the epidemic and the resumption of work nationwide, the pessimistic atmosphere of the market has eased, and the periodic low point of iron ore may have appeared. Affected by the novel coronavirus pneumonia, iron ore fell sharply after the Spring Festival, followed by the continuation of the low vulnerable oscillation pattern, while the iron ore main contract rebounded sharply in February 11th, and the main contract in May recovered 600 CNY/ton integer mark. We believe that after a week's operation, the market's panic about the epidemic has been fully released. With the gradual arrival of the marginal easing of the epidemic and the resumption of work nationwide, the market's previous pessimistic atmosphere has been eased. After the 11 day's inflation, the periodic low point of iron ore may have appeared. The reduction of steel production power increased the epidemic, which led to the extension of Spring Festival holiday, severe restrictions on the flow of personnel in some areas, and affected all walks of life across the country. Since the Spring Festival, steel mills have been facing the pressure of active or passive production reduction. In terms of active production reduction, due to the sharp drop in steel prices after the Spring Festival, the profit of steel mills has declined seriously. At the same time, due to the limited transportation, the steel plant inventory has accumulated greatly since the Spring Festival, and some steel plants have serious inventory backlog.

According to industry data, as of February 7, the total inventory of steel mills reached 9.7893 million tons, a record high since statistics. The decline of profit and the accumulation of inventory increase the power of steel plant to reduce production. In terms of passive production reduction, the flow of personnel is limited, some workers cannot return to work on time, and some steel mills are short of manpower, thus passive production reduction. Under the pressure of active or passive production reduction, the capacity utilization rate and production data of steel plants have declined significantly after the Spring Festival. As of February 7, the blast furnace capacity utilization rate of the steel plant was 81.77%, down 2.36% compared with that before the Spring Festival, and the total output by varieties was 9.4175 million tons, down 4.97% compared with that before the Spring Festival. Pessimism gradually digested from the situation of epidemic development after the Spring Festival, in addition to Hubei, the newly confirmed cases in other regions have dropped for seven consecutive days, which shows that the epidemic prevention and control in other regions of the country except North Lake has achieved preliminary results, to a large extent alleviating the previous market concerns about the spread of the epidemic. In addition, since the evening of February 10, all ministries and commissions of the central government and the official media have frequently voiced their voices, calling for the resumption of construction projects and the commencement of new projects. The state new office said that it would strictly stop the restrictions on enterprises' resumption of production in simple and crude ways.

The national development and Reform Commission said that the prevention and control measures for non resumption of production are unsustainable and difficult to achieve the goal of overcoming the epidemic. This shows that the high-level government adheres to the "two hands" determination of epidemic prevention and control and economic development. In this context, the progress of resumption of work in many places in the later period of the country is better than the market expectation, and the periodic low point may have appeared. There was no significant accumulation of inventory due to the impact of the epidemic, steel inventory has been significantly accumulated, after the market was worried that iron ore will also have a significant accumulation of inventory. However, according to the current situation, the extent of iron ore inventory accumulation is significantly lower than the market expectation. As of February 7, the iron ore port inventory was 126 million tons, an increase of 2.05 million tons compared with that before the Spring Festival. At the same time, the steel plant sintering powder inventory decreased from 22.41 million tons to 17.67 million tons, a decrease of 4.74 million tons compared with that before the Spring Festival. It can be seen that the iron ore inventory did not accumulate significant pressure during the domestic epidemic prevention and control period. Although the demand of steel mills has declined recently, the shipping volume of foreign countries has also remained at a low level, especially that of value since the fourth quarter of last year, and the supply side has contracted significantly. Conclusion in general, we believe that after the operation of the week after the Spring Festival, iron ore has fallen sharply, and the market panic about the epidemic has been fully released. With the gradual arrival of the marginal easing of the epidemic and the resumption of work nationwide, the pessimistic atmosphere of the market has eased, and the periodic low point of iron ore may have appeared.