Posted on 22 Dec 2020
The speculation-driven imported iron ore price surge will come to an end sooner or later and the price will correct downward when the market frenzy eases, Luo Tiejun, vice chairman of China Iron and Steel Association (CISA), shared at the Mysteel Annual Summit in Shanghai on December 19.
“The iron ore prices will be onto a downward path when the market has fully digested and when all the speculative factors play out,” Luo said, warning that the recent and persistent surged in not only iron ore prices but also scrap and coke prices will weigh on the Chinese steel mills’ steel margins in the end even though for now they appear supportive to the steel prices.
To illustrate the irrationally increases in the iron ore prices, he used the Platts’ iron ore pricing index as an example, which as of December 18 shot up to a nine-year high of $164.15/dmt CFR China, up $70.95/dmt or 76% since the start of the year, and the rise since the start of November alone totaled $45.1/dmt, or about 63.3% of the total gain so far this year.
More alarmingly, for the past 14 working days of December, the index jumped up by $31.1/dmt or 43.8% of the total growth so far this year, which had apparently deviated from the industry’s fundamentals, way beyond the Chinese steel mills’ expectations, and showing clear signs of market play-up by the capitals, he highlighted.
To counter the overzealous iron ore prices, CISA has been repeatedly calling for the build-up of a sustainable and strategic iron ore supply system via a series of crucial efforts such as investing in overseas or domestic iron ore assets or nurturing the steel scrap recycling including imports and reuse in the steelmaking, he said.
Besides, CISA suggests setting up a new iron ore pricing mechanism, further strengthening the control and optimizing the operations of the futures market including cancelling night trade sessions to prevent speculation when the physical market has been off for any trading.
Written by Victoria Zou, zyongjia@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
Source:Mysteel Global
