GDP target for the first time in eight years, the impact of iron ore geometry?

Recently, Wenxu, Premier of the State Council, proposed to report on the government work at the Fifth Session of the 11th National People's Congress that the gross domestic product in 2012 grew by 7.5%. This is the first time that our country’s gross domestic product (GDP) growth target is below 8% for the first time in eight years.

For the adjustment of this expected goal, Wen Wen explained that the main goal is to gradually converge with the goals of the “Twelfth Five-Year Plan” and guide all parties to focus their work on accelerating the transformation of economic development methods and effectively improving the quality and efficiency of economic development. Come up to help achieve a longer period, higher levels, better quality development. According to the analysis, after the economic slowdown, the pace of development of all industries in the country will slow down. The steel industry, especially downstream steel, such as real estate, infrastructure construction, auto home appliances and other industries will be reduced in growth rate, inhibiting the steel industry, is bound to It will also affect the demand for iron ore.

Iron ore prices will not appear large area diving

Foreign miners may not be pessimistic. They are more than happy to discover the true needs of iron ore through the phenomenon. "They don't care much about the numbers. For example, in the blast furnace, only a dozen of them were built in Qian'an, Hebei Province. They are very happy to see this phenomenon and they are very confident in China," said the analyst.

Du Lishi, chairman of Rio Tinto, once said that due to uncertain financial markets in 2012, especially the debt problems in the euro area, commodity price volatility will continue to increase. Rio Tinto’s 2011 net profit was US$5.83 billion, which was a decrease of 59% year-on-year.

However, Rio Tinto's decline in net profit did not come from the previous sharp decline in ore prices. On the contrary, profit from depreciation and amortization of Rio Tinto's iron ore segment in 2011 was US$20.96 billion, which was a year-on-year increase of 26%, thanks to increased iron ore shipments and rising average prices.

The author has learned that the current tonnage of iron ore prices is around US$140, which is still relatively low compared to the high tonnage of US$170 from January to September last year. However, for foreign miners, the current price is not low. Ore is still a huge profit industry, "as long as China's demand does not show a substantial contraction, the price will not be a large area of ​​diving." Zhang Jiabin said.

However, if the ore price drops, some high-cost mining companies in China may face new challenges.

“A few domestic mines may be converted into imported mines at around US$130 (tonne price). If prices continue to go down, some companies may have to cut production or stop production due to production costs.” According to a rough estimate, the impact of the output is 20%. 30%, and this partially reduced mine will be replaced by low-cost mines released domestically.

Insufficient power for price increases

There has been controversy over the trend of iron ore prices this year. However, the supply and demand relationship between iron ore is a decisive factor or the consensus of the industry, including the supply of global iron ore, as well as the actual production of steel during the "Twelfth Five-Year Plan" and other factors. Industry analysts believe that this year's GDP growth rate positioning 7.5%, steel demand will slow down. Coupled with high inventory levels and continued expansion of miner's production capacity, the power for iron ore price increases is obviously insufficient.

Wang Xiaoqi, vice president of the China Iron and Steel Association, said on February 28th at the 2012 China Iron Ore Conference that the situation of oversupply of iron ore has already formed and prices are difficult to support. The price will be between US$110-130/ton during the year. In early March, CEO Sam Walsh of Rio Tinto’s iron ore business stated that the global supply of iron ore is still tight and China’s demand is improving.

On February 29, Moody’s, the three largest rating agencies in the world, stated in a report that due to the global iron ore capacity is expected to continue to grow in the next two years, the global iron ore production capacity will be 450 million tons per year in the next two years. The speed of growth, while China's steel production is facing contraction, the global iron ore prices may decline in the coming period of time.

According to data from the General Administration of Customs, China imported 59.319 million tons of iron ore in January, a decrease of 7.4% from the previous period and a decrease of 13.99% year-on-year. The average import price was US$136.5/ton, a year-on-year decrease of 9.9%, and a year-on-year decrease of 16.2%.

In addition, iron ore stocks in China's ports are still nearly 100 million tons, which is at a historical high.

The current market situation is grim and the trend is uncertain. As of yesterday, the domestic iron ore price was stable, and the market price of Qian'an 66% grade fine iron powder (dry basis included tax) was 1,200 yuan/ton. The short-term market was affected by seasonal factors of downstream demand. The March market may be better than February. , Iron ore prices may rise in March, but the increase will not be too large.