Demand is less than expected
At the close of June 9, the main iron ore contract closed up 3.98%. In May of this year, the iron ore price index broke through the $230/ton mark. Compared with the average value of the iron ore price index for the whole year of 2020 of $108/ton, the increase is as high as 113%.
Afterwards, my country severely cracked down on the chaos of foreign iron ore price increases, and the price of iron ore fell in response to a drop of nearly 20%. What is the current price of iron ore and what will be the future price trend?
The price of iron ore is currently at the highest level in history. The price of iron ore is US$120/ton as an important tipping point. The cost of most mines in the world is below this price, so the production momentum is strong.
Under the current situation, the four major mines have little meaning to control the quantity and price, because once the output is reduced, it will only give up market share. Therefore, if there is no immeasurable disturbance in the later period, the probability of iron ore shipment will remain at a relatively high level.
At present, the main contradiction of iron ore lies in the demand for terminal steel. Since the demand for real estate and infrastructure is likely to be less than market expectations, the finished product is likely to weaken. The weakening of finished products will reduce the profits of steel mills, and iron ore prices will be suppressed. At the same time, the supply of iron ore will increase in the second half of the year.
Under the background of suppressed profits of steel mills, steel mills will switch to low-grade ore, while the new supply of non-mainstream mines is mainly low-grade ore, and it is relatively easier for steel mills to suppress prices. On the whole, iron ore should be mainly short-selling rallies.