Operators and industry insiders generally believe that at the beginning of 2022, the iron ore market “strong supply and weak demand” pattern will not change, which determines the iron ore market price is easy to fall rather than rise, shock down. “Iron ore prices are expected to fall in 2022,” a research institute said.In interviews, operators and industry insiders said there are two reasons behind “strong supply and weak demand” in early 2022.
First, at the beginning of 2022, some steel mills will still be in the state of maintenance and production, which will affect the release of capacity. According to incomplete statistics, at present, the national iron and steel industry is in the maintenance of about 220 blast furnaces, affecting the average daily output of about 663,700 tons of hot iron, is nearly 3 years to affect the most hot iron production stage.
Second, optimize the structure of the steel industry and actively promote the high-quality development of steel enterprises. In capacity replacement, steel companies reduce the length of the process steel production, iron ore demand continues to contract. In the context of “carbon peak” and “carbon neutral”, The State Council issued the “Carbon peak 2030 Action Plan” clearly, promote the structural optimization of the iron and steel industry, vigorously promote the demonstration of non-blast furnace iron making base, and promote the whole scrap electric furnace process. In addition, the Opinions of the CPC Central Committee and The State Council on Deepening the Battle against Pollution requires the transformation of the long process of blast-converter steelmaking into the short process of electric furnace steelmaking.
As can be seen from the recently announced steel capacity replacement scheme, the new steel production capacity is about 30 million tons, of which the electric furnace steel production capacity is more than 15 million tons, accounting for more than 50%, meaning that more enterprises choose the short process steel process. Undoubtedly, the construction of carbon emission system across the country and the introduction of the 2030 “carbon peak” action plan will create conditions for iron and steel enterprises to make more scrap steel, less iron ore. In 2022, steel mills’ demand for iron ore is expected to weaken again, and a significant price rise in the iron ore market is unlikely.
In the medium and long term, “carbon peak” and “carbon neutral” will remain the negative correlation factors of steel industry capacity release, which will have a direct impact on iron ore demand. In short, the iron ore market has not gone away, there is no momentum to support its price to rise significantly.
Experts point out that in the medium and long term, there is no significant change in iron ore supply and demand, iron ore prices also do not exist a substantial rise in the basis. Iron ore spot price in 80 USD/ton ~100 USD/ton range, is relatively reasonable; Above $100 / ton, fundamentals and demand are not supported; If it falls below $80 / ton, some high-cost mines may be withdrawn from the market, making the market more balanced.
However, some industry insiders believe that the prediction of the iron ore market trend in early 2022, but also need to pay attention to the impact of refined oil, fuel oil, thermal coal market, shipping market changes on the iron ore market price. In 2021, the global oil, natural gas, refined oil, coal, electricity and other energy supplies are tight, inventories are low, and prices generally rise sharply, with an average year-on-year increase of more than 30%. Some energy product prices increase by double or several times, resulting in a significant increase in all transportation costs from sea to land. Transport capacity gap increases, Marine transport supply and demand tension, freight soaring. According to relevant data, in 2021, the global seaborne price of dry bulk cargo (BDI) went all the way and once exceeded 5600 points in October, up to three times higher than the 1400 points at the beginning of 2021 and a new high in 13 years. Shipping costs are expected to remain high or even rise in 2022. On Dec. 9, the Baltic Dry Index (BDI) closed at 3,343, up 228 points, or 7.3%, from the same period. Dec. 8, the coastal metal ore freight index closed at 1377.82 points. At present, shipping prices continue to rebound trend, BDI index is expected to shock in the short term.
Industry analysts believe that at least in early 2022, the global “energy shortage” will not be completely removed. High shipping prices and rising overseas energy prices will have a certain impact on iron ore market prices.