On November 16, 2021, the intraday price of iron ore futures was 540 yuan/ton, a decrease of over 60% compared to 1358 yuan/ton in May this year. In the first and second half of this year, the price trend of iron ore showed a basic situation of soaring and cliff like decline, and the downward trend of iron ore is still continuing.
Regarding the future market of iron ore, Jiang Shengcai, Secretary General of the China Metallurgical Mining Enterprise Association, believes that the current macro and industry situation does not support high ore prices and high steel prices.
Jiang Shengcai analyzed that, from a macro perspective, the current inflation in the United States exceeded expectations. It is expected that the Federal Reserve will gradually withdraw from the easing policy, reduce the scale of debt, and end the overflow of liquidity before the end of the year. In order to prevent the risk of foam, China will also tighten ahead of schedule. In the first half of the year, liquidity has gradually decreased. M2 growth rate has dropped from 10.9% to 8.3% in September, and social finance has dropped from 13.7% to 10.0% at the end of September. Under the trend of tightening liquidity, real estate investment has fallen, infrastructure investment has increased, and manufacturing investment has slightly improved. At the macro level, high mineral and steel prices are not supported.
From the perspective of industry trends, firstly, the "dual limit" of crude steel production capacity and output is a new requirement in the new development stage, which is an important path to cope with carbon peak and carbon neutrality, achieve green and low-carbon development, and also an important measure to alleviate resource pressure; Secondly, the country has adjusted its steel import and export policies, encouraging the export of high value-added products and the import of primary steel products, while restricting the export of low-end products, with a clear policy orientation; Thirdly, we will promote the convenience of importing recycled steel raw materials, effectively increase the supply channels of iron elements, and increase the proportion of electric furnace steel. Fourthly, the upstream and downstream of the steel industry will work together to promote the application of high-strength and energy-saving steel, and the reduction of steel usage is expected.
In terms of domestic and international iron ore supply, global iron ore production continues to grow, and by 2025, global iron ore production will reach over 2.6 billion tons; At the same time, China has begun to strengthen the development of iron ore, and domestic iron ore production will maintain stable growth. By 2025, the production of iron concentrate will reach 350 million tons. According to the China Iron and Steel Association's estimate, this data may reach 370 million tons by then, and the future increment of domestic mines is expected; Furthermore, we will steadily promote global mining investment cooperation, and it is expected that the proportion of overseas equity iron ore will exceed 20% by 2025; Finally, there is an improvement in the utilization of scrap steel resources. By 2025, the supply of scrap steel resources will reach 320 million tons, and the proportion of scrap steel supply will reach 30%.
Jiang Shengcai predicts that domestic iron ore prices will fluctuate within the range of 70-100 US dollars from 2022 to 2025.
Regarding the sharp rise and fall of iron ore this year, Jiang Shengcai stated that it has caused significant damage to the mining industry, resulting in production setbacks, investment shrinkage, and industry contraction. A large number of enterprises have suffered losses, closed down, and exited, leading to a decline in market entities and industrial investment.
He reminded that domestic mines must be prepared for danger in times of peace, accelerate the filling of shortcomings and weaknesses, continuously innovate management, strengthen the foundation, and practice hard. They must adhere to the principles of reducing costs, improving efficiency, reducing leverage, preventing risks, stabilizing the market, promoting development, and enhancing their ability to resist risks.

Source: Economic Observer Network