The price of iron ore on the Singapore Exchange fell 16% within a month.
For steel, it is likely that prices will continue to increase in the coming months.

Asian iron ore prices fell in the last trading session of the month. The steel raw material market has “collapsed” under China’s determination to reduce steel output to reduce emissions and slow domestic demand for construction and manufacturing materials.

The price of iron ore traded on Dalian at the end of the session on July 30 fell sharply, losing 8.1%, to 1,027 yuan ($158.95)/ton, down 8% for the whole month, the largest decrease. as of February 2020.

Iron ore prices on the Singapore Exchange also fell 7.7% to $175.95/ton, down 16% within a month. Iron ore with 62% import content, spot delivery at Chinese seaports, ended July at below $200/ton for the first time since May 28, down to $195/ton, down 9 percent for the whole month. %, according to data from consulting firm SteelHome.

Contrary to iron ore, steel prices continued to increase in the session 30/7. Accordingly, rebar, used in construction, on the Shanghai floor increased 1% to 5,705 CNY/ton; hot rolled coil (HRC), used in production, increased by 3.1% to 6,120 CNY/ton; stainless steel also increased 3.1% to 20,065 CNY/ton.

Generally in July, rebar price increased by 12%, HRC steel increased by 14%; and especially, stainless steel increased by 20%, the most increase since the first contract was traded on the Shanghai exchange in 2019.

The reason for the sharp increase in prices was due to concerns that supply would be scarce after the Chinese Government tightened steel production.

Iron ore prices fall but steel prices rise
“Price fell on weak iron ore demand in the face of China’s policy to reduce steel output to reduce emissions,” said Commonwealth Bank of Australia commodities analyst Vivek Dhar. China has asked factories to limit output this year to no more than 2020. Production in the first half of this year has increased by nearly 12% from a year earlier, so output in the second half will had to drop sharply to offset the 12% excess in the first half of the year.

“We find it reasonable to forecast that steel production growth in the second half of the year in China will slow down significantly compared to the first half,” said JPMorgan analysts.

“After record strong steel production in the first half of this year, we are starting to see China’s steel production decline. Profit margins have fallen, especially for steelmakers that supply the construction industry. construction,” said CRU steel analyst Richard Lu.

Shagang Group, the world’s fourth-largest steel mill, has announced it will cut output and export overseas to comply with government regulations to cut emissions.

In addition to China’s steel output limit raising concerns about upcoming material demand decline, investors are also watching for signs of weakening demand from China’s real estate sector. The government has called on five cities (Yinchuan, Xuzhou, Jinhua, Quanzhou and Huizhou) to stabilize the local housing market after house prices rose sharply in the first six months of this year.

In terms of iron ore supply, Brazil is on track towards a year of high iron ore exports. Brazil’s Vale SA, the world’s second-largest ore miner, said it was confident of hitting its target output of 315 million to 335 million tonnes this year, despite recent disruptions.

Meanwhile, Australia’s mining activity has been constrained in recent months by congestion at Rio Tino’s main export port. However, that problem has now been resolved, and Australia also has new mines in operation. Therefore, supply from Australia will increase in the second half of this year, continuing to increase until 2022.

Fortescue Metals Group’s exports in 2021 are forecast to reach 182.2 million tons, and in 2022 it will reach 180 million -185 million tons. BHP Group said full-year iron ore production will be near the top of its forecast range, thanks to record output at two mines in Western Australia. However, a rebound in Australian iron ore supplies will mean more for markets other than China, which is trying to reduce its reliance on Australian iron ore.

In addition, China itself is investing heavily again in iron ore mining, since the price exceeded 120 USD/ton. Therefore, China’s iron ore supply in 2021 and 2022 will increase by tens of millions of tons.