Iron ore has a good short-term upside

Recently, the main iron ore news is the price adjustment of steel mills. Among them, East China has a large increase. Shagang's price adjustment policy in mid-May is: 200 yuan/ton for high-line, 70 yuan/ton for thread, and 150 yuan/ton for screw-up; Nangang , Maanshan Iron and Steel, Yangtze River, Zhongtian and other East China's mainstream steel mill thread ex-factory price are raised 40-70 yuan. Shiheng Special Steel's three-level large snails were raised by RMB 20/ton, and the ex-factory prices of Hebei and Shandong steel mills rose by 10-20, and some dropped by 10 yuan.

Iron ore rebounded sharply after a long-term narrow shock. During the period, the spot was synchronously up, and the transaction was improved. Before the Tangshan limit sintering restarted, the steel mill had the power to supplement the sinter, and the blast furnace resumed production also had the expectation of increasing the amount of ore. The demand side was more prominent, and the port volume and port data were outstanding. There is a tendency to improve marginally. At the same time, the boost of demand under high profits also drives the price difference between high and low prices. However, due to the stable supply, the ore's rising drive is mainly from the demand side, so the current stacking height is cautious, and the sustainability of the replenishment is observed. The recent policy to expand domestic demand, the central bank's monetary easing is expected to increase, affected by the rise of rebar and coke futures, the support of key areas of iron ore futures is strengthening, and the expected increase is expected to increase; but the port inventory is still high, the pressure is still large, severely subject to rebar The impact of fluctuations, prevention of multiple unstable factors such as trade wars, affecting the callback. Operation: After the low-cost zone is stabilized, it will be dominated. When the pressure on the pressure zone is under pressure, it will be short-selling, paying attention to the initiative of long and short funds in key areas.

Since March, the demand situation of the iron ore market in the domestic market has been less than expected, the prices of downstream finished steel products are sluggish, the use of scrap as a substitute continues to rise, the demand for iron ore is weakened, and the port inventory is at a new high, in the face of supply and demand pressure, even The iron futures price continued to be in a downturn. On the first trading day after the May Day holiday, led by the higher price of thread, the iron ore opened a new round. Mainly due to the year-on-year decline in national building materials inventory by 7%-8%, steel mills have good profits and increased storage, driving demand for iron ore to rebound, but the pressure on environmental protection and production is still on the policy, and the inventory of steel mills is safe, and the willingness to replenish the warehouse is not strong. To a certain extent, it affects the sentiment of the market. The short-term iron ore is being boosted by the thread and international trade, but in general, the blast furnace recovery rate is still low, which is not conducive to the increase of iron ore port, the supply and demand pressure is still obvious, the pressure level and support level on the plate are obvious, and the price is expected. The overall appearance is narrow and oscillating.

Figure 1: Iron ore port inventory and port volume

As of May 11, the port situation, the national port inventory of about 158.7 million tons, although the stock is still at a high level, but it may not be a negative for the price of the company. As far as the volume of land is discharged, it has remained at a high level in April. The average daily port volume has rebounded rapidly from 2.42 million tons to 2.7 million tons, indicating that the demand for downstream enterprises still exists. In addition, after the end of the heating season, the utilization rate of the blast furnace began to rise. Although the impact of the extended production was extended, the utilization rate of the blast furnace in early May rebounded to 83.4% after the side supply reform removed the inefficient production capacity. There is still room for resumption.

Looking into the world, Australia's Brazilian iron ore shipments fell by 967,000 tons to 24.372 million tons, mainly from the three major mines in Western Australia, but shipments in Western Australia remained stable compared to the same period last year. There are a small increase in Vale shipments. The arrival volume of 11.88 million tons in North China, East China, and along the Yangtze River has rebounded significantly, and the fluctuations in late arrivals are expected to decrease. Under the background of strict environmental protection, the domestic mine operating rate rebounded insufficiently and did not rebound to the high level of last year. The short-term domestic production will continue to be stable.

In the past 17 years, the use of converter scrap has continued to increase. The annual production capacity of electric furnace is 26 million tons, but the capacity release is less than expected. It is expected to be around 17 million tons in 2018. Although the accumulation of scrap is high, the supply is strong and the energy consumption is small. However, the current recycling cycle system is imperfect, the cost of electricity is high, the support is not strong, and the price of iron ore is in a weak position. In the long run, the steel industry is still dominated by long processes, supplemented by short processes. At present, the price of scrap is at a high level, and the price/performance ratio of hot metal is prominent. The current average price difference is 400 yuan/ton, which is the highest in recent years. The profit of the steel mills has shifted from the electric arc furnace production method to the high-quality iron ore mine. Together with the recent strong operation of coke prices, it has formed certain support for the price of the iron plate. At present, the release of seasonal demand has already started. Recently, the recent rebound of steel prices and coking coal coke is performance, but iron ore still maintains a narrow range of fluctuations, and the expected increase is expected to be postponed.

Changes in the price gap between high and low grades in the market will affect the short-selling choice of the mine, which will affect the trend of iron ore futures prices. For example, on the eve of the delivery of the I1705 contract, the price difference between the high and low grades is at a high level, because the delivery price of the low-quality ore is calculated to be higher than the spot price by the replacement of the transaction income, so the standard of the warehouse receipt becomes the low-priced Toke. Powder, not conventional PB and Kimbba powder. For the buyer, it will not choose to accept the low turnover rate in the background and the delivery price is higher than the market price. Therefore, under the influence of the air force, the I1705 contract has an abnormal long-term premium on the eve of delivery. Happening. The iron ore sales in mid-May showed that high-grade fines accounted for 62.54% and low-grade ore 26.53%, indicating that steel mills are still inclined to increase high-quality iron in the case of high profit and coking coal coke prices. Mine to increase the production of molten iron.

Figure 2: Pig iron cost and scrap cost spread

Therefore, as the first implementation of the high delivery standard I1809 contract, the impact of the delivery standard on the long-short trend has not yet been reflected on the disk, which needs to be analyzed according to the situation of the high and low grade spreads in the market and the marginal profit of the steel mills. In the case of a decline in steel mill profits and a shift in demand to low-grade or increased scrap, it is not excluded that short positions use high and low grade spreads to force long positions.

In early May, the social inventory of rebar was under the influence of the reform of the side supply and the implementation of the environmental protection policy. In the week of May 11th, the decline reached 6,524,200 tons, an increase of 38.25% over the same period of last year, and the inventory of hot coils was also in a period of decline, which boosted the price trend of the entire black system. As far as the ratio of the snails is concerned, the factors of this round of bullishness have not been fully released on the iron ore, and the ratio of snails has continued to increase, and there is no sign of turning. The current total social stock of steel is below the 5-year average. Although the weekly production of thread has increased to 3.04 million tons and the hot coil has increased to 3.37 million tons, it is still at a low level. On the supply and demand side, the steel supply side will be relaxed with limited production. Under the guidance of high profits, the supply will gradually increase. The short-term profit will have been fully released, and the steel price will remain high. This will be the fundamentally weak iron ore. The operation of the stone price has caused pressure.

Generally speaking, the current China-US economic and trade consultation reached consensus on some issues, and there are still major differences on some issues. It is necessary to continue to step up work and make more progress. The two sides agreed to establish a working mechanism to maintain close communication. The Politburo meeting: adhere to the positive fiscal policy orientation, maintain a stable and neutral monetary policy, combine the accelerated adjustment structure with the continuous expansion of domestic demand, and maintain a stable macroeconomic operation. It is necessary to deepen the structural reform of the supply side and promote the healthy development of credit, stock market, bond market, foreign exchange market and property market. Tangshan, Handan, Jiangsu Province and other places have been restricted by environmental protection and production, and some steel mills and coking plants have implemented the policy of stopping production. The fundamental weakness of the iron ore has not changed, and the steel mills have insufficient willingness to replenish the library. Most of them are asking for orders, and traders are willing to pay a good price. Driven by the price of finished products, the upward thrust of this round of iron futures prices has been fully released, and will remain strong and volatile in the short term. The pressure of 485 yuan above the I1809 contract is obvious, and the day-to-day trading with low suction and high throw can be carried out based on the 20-day moving average. In the medium term, although the strength of the US dollar has put pressure on the price of iron ore in the port inventory, the continued strength of the Baltic Dry Index has also driven up the cost of shipping and increased the cost line of iron ore. In the later period, as the supply side improves and the premium of the new delivery standard gradually reflects on the disk, it will support the iron ore price to break through the current pressure line.

(Editor: Chen Hao HF072)