Iron ore prices fall another 6% after China warns steel mills to take advantage of increasing price

15/05/2021
Regulators in Shanghai and Tangshan (China) cities on May 14 warned local steel companies about taking advantage of rising prices, colluding and spreading false information to gain profit via high prices after iron and steel prices hit a record high in recent days.
Reuters reported that the Shanghai municipal market regulator has noticed that it coordinates with other authorities to work with steel mills, asking them to "quote reasonable selling prices" and coordinate in stabilizing iron and steel prices.
 
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"Steel manufacturing and trading companies ... must not fabricate or spread price increases to disrupt market order," the notice stated.
In addition, the notice also prohibits excessive price increases, unless "there are significant changes in production costs".

According to regulators, the price of steel in China has increased beyond the increase in production costs.

China's Tangshan Steel Center - which produces more steel than India - the world's second-largest steel producer - has also announced having worked with all steel mills in the country. city. Duong Son said it will strictly handle steel manufacturers found to have manipulated market prices or hoarded goods.

After the announcements of Tangshan and Shanghai, iron and steel prices fell sharply, extending the second consecutive decline.

Accordingly, the price of rebar - mainly used in construction - on the Shanghai floor, for October delivery, ended May 14, down 6% to 5,640 CNY ($876.61)/ton; Hot rolled coil - mainly used in the manufacturing sector - also fell 6% to CNY 6,135/ton, bringing the combined decline in the past 2 sessions of both grades to about 9%.

However, for the whole week, steel prices still increased by over 2%; Since the beginning of the year, these two types of steel prices have increased by 34% and 43%, respectively. -

Plunging steel prices put downward pressure on steel production materials.

The price of iron ore for September futures on the Dalian trading floor fell 7.5% compared to the previous session, down to 1,173 CNY/ton; bringing the drop in the past 2 sessions to 17%.

However, for the whole week, iron ore prices still increased by 4.4%.

The price of imported iron ore delivered to China's seaport (62% content) in the same session also decreased by 12 USD to 220.5 USD/ton; Dalian coking coal fell 5% to CNY 1,922/ton while coking coal fell 6.4% to CNY 2,615/ton.

In the context that iron and steel prices stopped increasing, there were less optimistic forecasts about the price outlook shortly.

Moody's Investment Services said that iron ore prices have been rising recently but are difficult to sustainably high. However, the organization forecasts iron ore market fundamentals will remain strong this year, as supply remains constrained.

According to Barbara Mattos, Senior Vice President of Moody's: "Increasing steel demand will maintain iron ore prices at or above the price range of $70-100/ton."

Vale's iron ore production capacity in 2021 is forecast to be about 315-330 million tons, higher than 300 million tons in 2019 as well as in 2020, but much lower than the level of 380 USD/ton in 2018.

Meanwhile, most iron ore producers tend to maintain production volumes at current levels. BHP, Rio Tinto, Vale, and Fortescue Metals Group, which collectively control more than 70% of the global iron ore market, are all focused on keeping supply intact, raising regulatory compliance risks environmental and social and management for new projects.

ANZ bank on May 13 also lowered its forecast for iron ore prices at the end of 2021 to $150/ton because China will gradually phase out stimulus measures, and construction activity is nearing the end of the season. peak and it is very unlikely that China will introduce measures to curb imports of Australian iron ore.

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