Iron ore prices fell by a single day
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December 12 16:01:21, 2018
On the 25th, iron ore prices hit the largest decline since records, slipping to a 15-month low. According to data from Platts, the pricing arm of the pricing firm, iron ore spot prices fell 7.2% to $128.50 a tonne, the lowest level since July last year, and the biggest one-day drop in 26 months. Iron ore prices have fallen more than 30% in the past six weeks. The rapid decline in prices has caused a huge gap between spot prices and quarterly contract prices, prompting Chinese steelmakers to renegotiate contracts. The Financial Times said that traders said that some steelmakers threatened that if miners refused to lower the October-December contract price, they would break the contract. As the price of iron ore plunged and threatened to break the contract came out, some Chinese steel mills in the world's largest steel industry have stopped production due to shrinking domestic demand, and some steel companies have even stopped buying iron ore. According to the Financial Times, about 20% to 30% of small and medium-sized steel mills in South China have closed their steelmaking furnaces. A trader at Rizhao Steel City added that some of the new steel-making furnaces in steel mills are idle. “The factory doesn’t want to produce, because it will only lose money.†Consulting firm MySteel estimates that 5% of China’s steel production has been temporarily suspended in recent weeks. Small steel mills that cut production usually buy iron ore in the spot market, mostly from Indian miners, so their absence may cause a disproportionate drop in spot prices. Traders said that larger steel mills are buying raw materials from larger miners, and while some have announced maintenance-related production cuts, their conditions are still solid. “What is certain is that everyone is now desperately cutting production costs. Steel demand is very weak. For example, high-speed rail investment has been reduced by 50%,†said Xu Zhongbu, chief executive of Beijing Metals Consulting. He previously worked in several large steel mills in China. In China, due to shrinking demand, after the Golden Week of the 11th, the transaction price of steel products fell sharply, showing a trend of “inverted onionsâ€. On the 26th, Caixin.com quoted Zhang Wei, chief analyst of Hujie Investment, as saying that within this week, the average price index of steel products fell by 5.2%. “This is very rare. Under normal circumstances, the spot price of bulk commodities will not be so large. The change". Zhang Wei believes that the reason for the sharp fall in steel prices is firstly the decline in the operating rate of the construction market, followed by the sharp decline in fixed asset investment, mainly including real estate and high-speed rail. Since September, the Shanghai Futures Exchange's steel contract prices have fallen by 18.1%. Last week, steel futures prices hit a one-year low. Rebar is commonly used in the construction industry. In terms of production, China's crude steel output in September fell 3.5% from August to 56.7 million tons, the lowest in seven months. Japanese steelmaker JEF Holdings said that steel prices in Asia will remain stagnant as demand in China slows and supply in South Korea exceeds expectations. According to Jin Gan, president of the China Coking Industry Association, from the recent downstream industry data, China's steel demand is difficult to improve in the later period. Although the construction rate of the construction industry has continued to record high, the pulling effect on long products has gradually deteriorated. Fixed assets investment showed a good momentum of steady development, but the growth rate of railway transportation investment fell sharply. The sales volume of construction machinery's main products continued to grow negatively year-on-year, with a slight increase from the previous month and a slight improvement in the short-term. However, from the slowdown of the machinery downstream demand industry, the medium-term is still not optimistic. Experts analyzed that under the influence of the high-speed rail accident, the slowdown in railway construction has also dragged down the steel industry. Under normal circumstances, the railway construction monthly consumption of construction steel is about 1.3 million tons. According to statistics, in the first 8 months, domestic railway infrastructure investment completed 316.5 billion yuan, down 11.1% year-on-year. The approval of new railway projects and the progress of construction projects under construction have been completed. Slowdown, this is not good news for the stability of the steel market. Some steel companies said that the recent heavy machinery, ships, electrical equipment and automobiles and other manufacturing industries are not giving force, resulting in demand for steel.