1. Review of iron ore market in the first half of 2020
Iron ore reappeared bull market in the first half of 2020, with 62% of the general index rising from the lowest $79.8/t after the Spring Festival to $106.55/t at the beginning of June, with a maximum increase of 33.5%. The iron ore is in a pattern of short supply as a whole. The iron ore inventory in port 45 has decreased from 125million tons at the beginning of the year to 106million tons in June, and the inventory decreased by 19 million tons. In the first quarter, due to the factors such as hurricane in Australia, rainstorm in Brazil and the unexpected recovery of vale, the supply of mainstream minerals was significantly lower, the non mainstream mines were disturbed by the epidemic situation, and the overall delivery was also low. The second quarter delivery rose on a year-on-year basis, but the increase was limited.
In terms of demand, although the epidemic situation leads to the delay of terminal demand, the long-process steel plant continuously produces, and the rigid demand for iron ore is good. With the control of epidemic situation in China, the terminal demand is obviously released, the return of blast furnace drives the demand for iron ore to rise, and the iron ore is accelerated to the warehouse. Specifically, from January to March, repeated transactions around the epidemic: after the Spring Festival, affected by the domestic epidemic, the ore price fell sharply, the lowest price of the main iron ore contract fell to 569.5 yuan / ton. With the improvement of domestic epidemic situation, the ore price rose, and the main iron ore contract rose to 692 yuan / T, but in March, the large-scale outbreak of overseas epidemic broke out, and the ore price fell again, The minimum contract for iron ore main force fell to 542 yuan / ton. April June: with the control of domestic epidemic, the demand for construction steel broke out, and the supply level of iron ore was on the whole low. Especially since May, Australia and Pakistan have been overhauled frequently. The epidemic in Brazil has also disturbed the supply. The iron ore has accelerated the warehouse removal and adjustment, and the panel has risen greatly. The main iron ore contract has risen to 798 yuan / ton at the beginning of June.
2. The increase in iron ore supply in the second half of 2020 is relatively large, but the increase is relatively limited compared with the previous year
(1) It is estimated that the supply of the four mines will increase by about 20million tons in 2020, and that in the second half of the year will be about 13million tons, and the increase of the four mines to China will be about 6million tons year on year; The non mainstream external mines increased by 25million tons year on year, and 10-15 million tons in the second half of the year. In the first half of the year, due to the factors of hurricane, rainstorm in Brazil and the lower than expected production of vale, the shipment of Australia and Pakistan was low, but the supply of non mainstream mines increased. According to the data released by the General Administration of Customs of China, the import of iron ore from January to May was 445 million tons, an increase of 21.386 million tons, an increase of 5.1 percent, 0.3 percentage points lower than that in April. From different countries, the import volume of Brazilian mines has decreased significantly from the previous year, with 6.616 million tons imported from January to April, down 10.91 million tons (-14.16%) year on year; The import volume of Australian mines increased slightly from the previous year, with 22.22 million tons imported from January to April, an increase of 16.42 million tons (+7.9%); India's mineral industry increased significantly from January to April, with 8.16 million tons of imports, up 603 tons (+283.92%) year on year; South Africa's ore industry grew rapidly year on year, with imports of 18.47 million tons from January to April, an increase of 2.72 million tons (+17.23%); Ukraine's mines also increased significantly year on year, with imports of 6.74 million tons in January April, an increase of 3.48 million tons (+106.57%). Overall, the non mainstream mines, stimulated by high ore price, have significantly increased the delivery volume, and the proportion of non mainstream minerals to imported iron ore increased from 16.54% in 2019 to 18.98%. Rio Tinto and vale both cut their annual supply targets in the first quarter quarterly. Rio Tinto was affected by the hurricane in the first quarter, with Pilbara production not expected, and Rio has lowered its 2020 annual traffic target from 3.3-343 million tons to 324-334 million tons. Considering the weather, epidemic situation and delayed production of some mines, Vale target output of Vale powder mine has been reduced from 340-355 million tons to 310-330million tons, and the target output of pellets is reduced from 44 million tons to 35-40 million tons. FMG despite the impact of the hurricane weather and the outbreak of New Coronavirus, but the company's first quarter volume is still 10% higher than the same period last year, FMG raised its 2020 2019.07-2020.06 (2019.07-2020.06) iron ore target volume, from the previously announced 1.7-1.75 million tons interval to 1.75-1.77 billion tons interval. According to the production and marketing plan of the four mines and the delivery rhythm of the same period last year, we estimate that the supply of iron ore for the four mines in the first half of 2020 is 522 million tons, an increase of 9.07 million tons (1.8%) year on year; In the second half of 2020, 583 million tons, an increase of 60.9 million tons (+11.7%) and 12.75 million tons (+2.2%) year on year, compared with the first half of the year. Among them, the four mines are expected to increase 32.03 million tons on a year-on-year basis compared with the first half of the year, an increase of 5.86 million tons year on year.
(2) From the perspective of the main producers of iron ore, the epidemic in Brazil and India has increased, and the supply of iron ore is uncertain. At present, Brazil, India and South Africa are in the period of accelerated outbreak, and the epidemic control in Australia is better. As of June 28, Brazil added 31587 cases on the same day, India added 19620 cases on the same day, South Africa added 6334 cases on the same day, and Australia added 45 cases on the same day. Brazil is in a severe situation, with the newly added quantity second to the United States on the same day, which has caused some disturbance to iron ore production and transportation. On June 6, Vale suspended the business activities of itabira comprehensive mining area due to the epidemic. The comprehensive mine area was operated by concei?? o、Cau ê And periquito three mining areas. On June 17, the freshwater Valley announced that the labor supervision branch of Minas gillas issued a lifting clause on the etabila comprehensive mining area ban, which had less than one million tons of impact on production. Although the epidemic in Brazil continues to rise, the Brazilian shipment is in a sustained recovery due to the high contribution rate of iron ore to Brazil's economy and the president's efforts to protect the economy. The production of iron ore fines in VALE2020 has been maintained at 3.1 to 3.3 million tons, and VALE said that this guidance has taken into account 15 million tons of output that might be reduced by the impact of COVID-19. Whether vale iron ore production can achieve the guiding goal depends on the control of the epidemic to a large extent. India has developed rapidly, and the newly diagnosed cases are the third in the world. Since March 25, the blockade of the epidemic in India has experienced four cycles. From June 8, India will reopen in stages, called "unsealing 1.0", but the high-risk regional blockade is extended to June 30, known as the "5.0" blockade. The epidemic in India has led to a decline in domestic steel consumption, India's exports to China are higher than that of the same period last year, and the lifting of the blockade is conducive to the restart of domestic demand in India. Since March 26, South Africa has also imposed a national blockade. In order to revive the economy, South Africa has reduced the "blockade order" of the epidemic from the most severe level to the fourth level on May 1, and further reduced to the third level on June 1. With the relaxation of epidemic prevention and control, the gradual resumption of local mines is conducive to improving the export of iron ore.
(3) domestic epidemic control, the output of domestic ore still has room for growth. Influenced by COVID-19 in 1-2 months, the output of domestic ore has been greatly reduced. In March, with the control of domestic epidemic situation, the domestic ore production was gradually resumed, and it has been restored to the same period last year. According to the Statistics Bureau of China, the output of raw iron ore in China totaled 111million tons in January February 2020, with a year-on-year of-6.2%, and the output in March April gradually recovered, and the output in January April decreased to -0.8% year on year. According to the data, the domestic ore production has been restored to the same period last year. As of June 11, the output of iron fine powder in 266 mines in China was 430300 tons / day, an increase of 12700 tons / day on a year-on-year basis, an increase of 12400 tons / day year on year; The utilization rate of 266 mines in China is 68.21%, 2.02% on month, 1.97% year on year. Considering the weakening of environmental protection on mines, the combination of high mining prices in 2019 stimulated the investment of the whole domestic mine. With the production of new production capacity, the domestic production still has room for growth in the later period. It is estimated that the output of domestic iron ore in the whole year will reach 920 million tons, which is equivalent to about 2300 million tons of iron refined powder, an increase of 10-15 million tons year-on-year.
3. the toughness of domestic demand and external demand have room for improvement. The demand for iron ore in the second half of the year is not pessimistic
In 2020 1-3, affected by COVID-19, China's terminal demand was delayed start. Although some BF was overhauled, the long process steel mill continued production and iron ore demand remained rigid. The Bureau of Statistics Bureau had 1-3 million tons of pig iron output in China in 1-3 months, an increase of 2.48% over the same period last year. In March may, with the start of terminal demand, the BF production resumed, and the output of pig iron increased significantly. The output of China's pig iron in January may was 360million tons, up 6.15% year on year, and 7.1% year on year in May, and the growth rate increased significantly. With the high production of molten iron, the port discharge of 45 port is far higher than that of the same period last year. From January to June 2020, the daily average port volume of 45 ports was 3.2 million tons, an increase of 167000 tons, with an increase of 5.9%. In the second half of the year, with the release of steel replacement capacity and the reduction of environmental protection and production restriction, the domestic iron ore demand remained high. Currently, driven by positive profits, the steel plant has been actively producing, and the output of molten iron is constantly innovating high. The utilization rate of blast furnace capacity has reached the extreme level, which limits the further increase of molten iron production. Meanwhile, in the off-season background, the end demand is weak, the steel profit is narrowed, and the weak price of the finished materials will drag down the demand of iron ore. however, with the arrival of the peak season of the terminal of jinjiuyin 10, the steel plant will start to rise again, Demand for iron ore is not pessimistic.
The overseas epidemic has spread obviously since March, the demand for steel such as automobile, shipbuilding and construction has declined sharply, and the output of overseas steel plants has been reduced significantly. According to the international iron and Steel Association, the global crude steel production in January may decreased by 5.26% year-on-year, of which, in May, it decreased by 8.73% year-on-year, which was narrowed from -13.41% in April. From the perspective of the main iron ore consuming countries, except for the positive growth of crude steel production in China, the rest countries are almost in negative growth. Crude steel production in May, China was + 4.2% year on year, with a month on month ratio of + 4 percentage points; Japan was 31.8% year on year, 7.8% on month; Korea was -14.1% year on year, 5.7% on month; India was 39.1% year on year, 26.1% on month; The EU was 26.8% year-on-year, 2.9% on month; The United States was -36.6% year on year, and was -4.1% on month. In the second half of the year, the overseas factories resumed production, and the demand for iron ore had marginal improvement space, but there was no turning point in the epidemic and the demand uncertainty was large. At present, the economy in Europe and America is restarted and PMI is recovering obviously, indicating that the economy is in the process of repair. In May, pmi43.1% of manufacturing industry in the United States increased by 1.6 percentage points on month; In June, pmi46.9 of European manufacturing industry increased by 7.5 percentage points on month. But the recent U.S. epidemic has rebounded again, and the economic recovery may slow down.
4. supply and demand are tight and balanced, and the gap between supply and demand is narrowed compared with the first half of the year
The iron ore inventory in port 45 is in the process of continuous warehouse removal since the first ten days of February. The start time of the warehouse removal is earlier than the same period last year. The iron ore inventory in port 45 has decreased from 125million tons in the beginning of January to 108million tons at the end of June, with a decrease of 17.7 million tons, a year-on-year decrease of 7.84 million tons, a new low since 2017. The sharp decline in inventory is the result of the combination of the unexpected supply of foreign mines and the strong domestic demand. From the inventory structure, the inventory of Australian and Brazilian mines has decreased significantly, including 7.04 million tons lower in Australian mineral inventory than at the beginning of the year, and 12.81 million tons lower than the beginning of the year. At present, compared with the first half, the supply cycle ratio of iron ore in China will increase significantly in the second half of the year, but the increase is limited year-on-year, with demand end, toughness of domestic demand and improvement space for external demand. The overall iron ore supply and demand are in a pattern of two prosperity, iron ore is still in a tight balance state, and the supply and demand gap is narrowed compared with the first half.
5. Outlook on iron ore market in the second half of the year
In the second half of 2020, iron ore is in a pattern of supply and demand, and the supply of iron ore will increase significantly compared with the first half of the year, but the increase is limited year-on-year. With the resumption of overseas factories, there is marginal improvement space for iron ore demand in the second half of 2020. Especially, the peak season of the tenth terminal of jinjiuyin will come, and the opening rate of domestic steel plants will rise, and the demand for iron ore is not pessimistic. The iron ore is still in a tight balance, the gap between supply and demand is narrowed compared with the first half of the year, and the overseas epidemic has a great disturbance on iron ore supply and demand. In a long period, with the gradual decline of the impact of supply side reform on the steel industry, the steel industry enters the capacity expansion cycle again, and the iron ore production increase cycle has passed, the overall performance of iron ore will be stronger than that of threaded steel, and in the second half of the year, we can pay attention to the low price and increase the ratio of ore to bolt
