On June 21, the Price Department of the National Development and Reform Commission and the Price Supervision and Competition Bureau of the State Administration for Market Regulation went to the Beijing Iron Ore Trading Center to conduct surveys to learn more about iron ore transactions and price changes since the beginning of this year. The supply and price stability of bulk commodities such as ore are guaranteed.
As soon as the news of the joint research came out, the black futures market fell across the board. Among them, iron ore fell 8.8% to close at 1121 yuan/ton per ton, after hitting 1118.5 yuan/ton before hitting a new low in the past two weeks; coke fell more than 5%, hot coil, thread and coking coal fell more than 4%. In terms of external disks, the main July iron ore contract on the Singapore Exchange once fell 5.7% to 195.05 yuan/ton, the lowest since June 8.
Since May, the State Council has repeatedly named bulk commodities and proposed multiple measures to help small and micro enterprises and individual industrial and commercial households cope with the impact of upstream raw material prices. Relevant state departments have also jointly interviewed key enterprises to increase supervision and crackdowns on hoarding, price hikes, and market speculation.
However, judging from the recent price trends of the black series, cooling and rebounding occurred alternately. The spot price of iron ore has remained above US$200/ton in the past three weeks. However, industry insiders told China Business News that the terminal market has gradually entered an off-season in demand, and the risk of overestimation of black commodity prices will gradually be released if the trend of intensive regulation and control remains unchanged.
Black department is being investigated intensively
Although regulators have repeatedly warned against hoarding and speculation, the price of iron ore, a key steelmaking raw material, is still at a high level.
The aforementioned NDRC meeting pointed out that the price of iron ore has risen sharply and continues to run at a high level, which has increased the pressure on the production and operation of mid- and downstream enterprises, and has attracted great attention from all aspects of the society. The state supports the healthy development of iron ore spot trading platforms and encourages relevant market entities to trade in compliance with laws and regulations. At the same time, they will pay close attention to changes in spot trading prices, investigate abnormal transactions and malicious speculation in a timely manner, and implement monopoly agreements, disseminate price increase information, and drive up Behaviors such as price and hoarding will be severely punished according to law and publicly exposed to maintain a good market order.
In addition, the National Development and Reform Commission recently stated at a regular press conference in June that through a series of measures, the current market speculation has begun to cool, and the prices of some bulk commodities such as iron ore and steel have fallen to varying degrees. In the next step, we will closely monitor market and price changes, intensify the supervision of the spot market, and maintain the normal order of the market.
In addition to iron ore, the coal market is also under regulatory pressure.
On June 17, the two departments also jointly visited the National Coal Trading Center to understand the operation of the coal market and price changes, and held a symposium to study how to ensure the supply and price stability of coal and other commodities.
The National Development and Reform Commission stated that it will closely monitor the price trends of bulk commodities such as coal, earnestly do a good job in price forecasting and early warning; timely understand the operation of relevant market entities, investigate abnormal transactions and malicious speculation, and severely crack down on illegal activities such as hoarding and price hikes.
Yide Futures analysts believe that this round of decline in black products is in line with expectations. On the one hand, with the increase in interest rate hike expectations, consensus on market cycle conversion has been reached and speculative sentiment has faded. Fundamentally, the high inventory of finished products and the high frequency of policy suppression, therefore, market participants are obviously facing high valuation risks.
Insufficient rebound momentum
Since the beginning of this year, the prices of some bulk commodities have continued to rise sharply, and the prices of some commodity futures and spot prices, which are mainly black products, have hit record highs, causing widespread concern from all quarters.
Previously, the five-sector meeting pointed out that the current round of price increases was the result of a combination of many factors, including international transmission factors, but also many aspects that reflected excessive speculation, disrupting the normal production and sales cycle, and contributing to price increases. In addition, in order to ensure the market supply and price stability of important livelihood commodities, the National Development and Reform Commission, the Central Bank, the National Bureau of Statistics, and the China Iron and Steel Association have all voiced recently to cool down the prices of bulk commodities. In terms of futures trading, the DCE, ZCE and Shanghai Futures Exchange have recently adjusted their trading rules in a timely manner based on the futures market.
According to industry analysts, the risk of overestimation of the price of ferrous commodities will gradually be released when the trend of intensive supervision and control remains unchanged.
From a fundamental point of view, according to the SMM survey, Tangshan and Handan released emission control policies last weekend, and many steel mills have started blast furnace maintenance under the pressure of falling profits and environmental protection. SMM statistics show that the amount of molten iron affected by blast furnace maintenance in Shanghai increased by 48.6% from last week. In addition, heavy rains are still expected in many areas in the south this week, and demand and prices for finished products are still not optimistic, which may drive iron ore prices down. In the short term, we need to continue to pay attention to the conduction effect of the price trend of finished products. In terms of spot, SMM quotes showed that the average price of 61.5% Qingdao Port (06198.HK) PB powder was 1485 yuan/wet ton, down 1.66% from the previous trading day.
According to the analysis of Zhongtai Securities, the current slowdown in domestic demand has led to a sharp drop in profit per ton of steel in the near future. The rebar has already suffered a book loss, and it is entirely possible that steel mills will reduce production by marketization in the later period. It is expected that steel demand may soon face the test of negative growth, and the ore price is expected to fall back to the 2020 average price of around US$110/ton. It is worth noting that the downward trend in demand has just begun, and there may be a period of negative demand growth in the future. In this case, the price of ore may fall below the average cost of domestic mines, which is US$80/ton.