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SunSirs: Oreprices may have a high point in mid-April, and the main trend is consolidation
April 15 2020 13:59:33SunSirs(Molly)

Compared with the sharp decline in February, the wide range of shocks in March, the domestic imported mine prices in April basically showed a stabilizing market. On the one hand, due to the impact of global public health events, the supply of the international iron ore market has shrunk. Coupled with increased domestic steel mill purchases, port inventories continue to decline, raising ore prices. On the other hand, the exchange of main contracts in the futures market showed a four-day upswing, driving spot prices to rise.

According to SunSirs price data, as of April 10, the average price of 62% PB powder port in Australia was 665.22 yuan / wet ton, Brazil 63.5% coarse powder price was 705 yuan / wet ton, and 62% printing powder price was 618.50. Yuan / wet ton, respectively, increased by 2.87%, 2.14% and 2.71% from the beginning of April, but decreased by 1.40%, increased by 2.21% and decreased by 2.75%. And from the perspective of price level, the current price of mainstream mine powder has not exceeded the shock high in March (678.56 yuan / wet ton), which is still down by 4.82% from the high in January.

From the perspective of inventory: As of April 10, the inventory of 45 ports nationwide was 11.60935 million tons, a weekly rebound of 730,500 tons. Although the eight consecutive declines have ended, the overall inventory level is still low, down 18.16 year-on-year %. This rebound in inventories is mainly due to the general recovery of mainstream mineral inventories. The root cause of this is that international mines have minimized market impact after responding to global public health events, although most ports are closed or blocked, but most of them can still be delivered normally, only the delivery rate is affected. According to SunSirs, shipments from Australia's Rio Tinto, BHP Billiton, FMG, Roy Mountain and other mines are currently normal. Brazil ’s Vale currently only controls Colombian ports, and others are relatively normal. However, from the perspective of port inventory levels, it forms support for imported mine prices.

From the demand side: As of April 10, the operation rate of blast furnaces of 247 steel plants nationwide was 78.86%, an increase of 1.51% week-on-week and a decrease of 2.56% year-on-year. The utilization rate of blast furnace ironmaking capacity was 78.81%, which increased by 1.01% week-on-week and decreased by 2.93% year-on-year. The average daily output of hot metal is 2.2038 million tons, which is a weekly increase of 28,200 tons and a year-on-year decrease of 82,000 tons. The data shows that the steel mill's operating rate and capacity utilization rate continue to increase, and have rebounded continuously for 8 weeks and 6 weeks, respectively, and have basically returned to the normal level in January. Secondly, the profitability of steel mills has also rebounded to 83.40%, which has risen for 5 consecutive weeks and is at a normally high level. This shows that the steel mills' demand for iron ore raw material purchases has increased, and the production enthusiasm will also increase when the profitability rebounds. It is expected that the price of iron ore will continue to support the future.

On the other hand, as of April 9, the average stock of steel mills in the current period was 24 days, a continuous decline of 5 cycles. Moreover, the total inventory of imported ore sinter powder has also dropped to 16.05 million tons, a slight decrease of 77,700 tons from the previous cycle, but it has rebounded. The average total inventory of imported mines fell to 262,700 tons, a new low in three months, and fell for 5 consecutive cycles. So it shows that after the current start of recovery, the consumption of steel mills' ore stocks has accelerated, and the demand for future purchases continues to rise.

Therefore, from the perspective of demand, with the domestic public health incidents basically controlled, most of the terminal manufacturing and infrastructure industries have returned to normal production rhythm and it is expected that the future demand for ore may continue to rise.

Futures: the main iron ore contract appeared at the end of March, and the bottom of the main contract was lower than the opening price after the Spring Festival in early February. Although there were two days of strong Yin and Yang lines, the subsequent four consecutive rises actually boosted market confidence and drove the spot price increase. From the technical indicators, the 5-day moving average reversed upward, but there was no crossover. The stochastic indicator KDJ third-line crossover has upward momentum. Although the MACD curve is generally in the negative range and the amount can be large, the curve is still upward, and a crossover is expected. Therefore, the price of goods and minerals may continue to rise in the next cycle.

To sum up, SunSirs analyst Hangsheng He believes that the fundamentals of the current domestic imported mining market have changed from a “weak supply and demand” to a “short-term mismatch between supply and demand” pattern, with a rapid increase in demand and support for price increases. But it is worth noting that the rate of resumption of production of electric frequency furnaces has accelerated, and the price of its main raw material scrap has fallen in April, with a decline of up to 16.8%. This will cause steel mills to change their enthusiasm for blast furnace ore production into electric furnace production. Although the ratio is not very high, from a cost perspective, profits will be better. In addition, the current downstream steel prices have shown signs of bottoming out, and the end market procurement is accelerating recovery. In particular, the construction steel market price has basically risen synchronously with the mine price, but the plate is still weak. Therefore, from the perspective of the industry chain, in mid-April, the mine price may have a high point, and then the trend of consolidation is the main trend; scrap replacement market may become another mainstream factor affecting its price in the future. Spot prices are still expected to be in the range of 660-690 yuan / wet ton.

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