Iron ore shocks at a nine-month low supply and demand is expected to continue to ease prices continue to pressure

Iron ore futures prices since the middle of July staged a wave of "flood discharge" market, the highest decline reached 35%, iron ore this week has been in the low shock finishing, today slipped to the low since November 2020 near.By the end of the day, iron ore main contract at 838 yuan/ton, down 2.16%.

Since the second quarter, miners such as Vale and BHP Billiton have generally increased iron ore production. According to their quarterly results, Vale's iron ore production in the second quarter has continued to increase by 11% compared with the previous quarter, and the current annual capacity of 330 million tons, if sustained, will reach 1 million tons per day in the second half of 2021.In terms of sales volume, Vale sold 74.9 million tonnes of fine iron ore and pellets in the second quarter, up 14.2% from the first quarter.

BHP's iron ore production in Western Australia was 72.85 million tonnes in the second quarter, down 4 per cent from a year earlier and up 9 per cent from the previous quarter.Western Australian iron ore production in FY2022 is expected to be in the range of 246 to 255 million tonnes (278 to 288 million tonnes on a 100% basis) as western Australian mining areas continue to focus on increasing production through productivity improvements.In addition, the Samarco joint venture project in Brazil reopened the concentrating plant in December 2020, and Samarco's annual iron ore production is 1.9 million tons.The project is expected to produce 3 to 4 million tonnes per annum (BHP's equity portion) in FY2022.

In addition, domestic crude steel production continues to push forward, since the middle of June pig iron production accelerated downward, with the recent reduction of output is expected to strengthen again, iron ore demand in the medium and long term is difficult to have a significant recovery.Although the port inventory of imported mines decreased month-on-month last week, but with the weakening of the influence of weather factors and the easing of port pressure, the imported mine inventory is still facing renewed pressure of accumulation, and the iron ore price is expected to continue the shock and weak operation.

As of August 11, the survey shows that the mainstream low-grade powder ore port in Shandong province has increased significantly in recent years, and the price advantage of some low-grade ore is obvious, which drives the demand of steel mills to increase in the short term.According to the SMM port spot price shows that the current mainstream low ore price gap month-on-month decreased by about 50 yuan/ton to 382 yuan/ton, and the PB powder as the representative of the mainstream fine ore month-on-month price has fallen by 310 yuan/ton, the price ratio of fine ore is gradually improving, and the mainstream low ore price gap is expected to narrow.

From iron ore to Hong Kong and Australia were significantly promoted, tang shan area recently released the 2022 winter Olympics air quality assurance plan, documents required in 2021 in hebei province reduce crude steel output of 21.71 million tons, the tangshan is 12.37 million tons, tangshan, hebei region outside of 9.34 million tons of crude steel production to reduce, iron ore supply and demand will continue to loose, prices expected to remain under pressure.