In September, the demand for the terminal peak season was gradually released, and the finished materials were accelerated to the warehouse. After the steel price stabilized, the short-term iron ore ushered in the replenishment market. On the one hand, the environmental protection production limit is relatively loose in September, the operating rate of blast furnaces in Tangshan area has been at a high level, the daily consumption of iron ore in steel mills is high, the inventory of steel mills is at a low level, and the demand for rigid replenishment is large. On the other hand, near the National Day, it is worried that the restrictions on vehicle traffic in the Tangshan area will affect the iron ore transportation, and the steel mills will stock up in advance. At the same time, BHP and Rio Tinto had major overhauls in September and October respectively. The supply pressure in recent months was less than that in the distant months. Short-term iron ore replenishment promotes the rise in mining prices.

However, in the medium and long term, the logic of iron ore supply and demand has not changed, and iron ore has re-entered the accumulated cycle. In terms of supply, supply in the second half of the year rebounded significantly, with the largest supply pressure in the fourth quarter. On the demand side, the expectation of weaker monthly demand is stronger, especially the housing is not speculative, real estate financing is limited, and the downward pressure on steel prices in the distant month is increasing. In response, steel mills adopt low raw material inventory strategies and iron ore demand is difficult. Centralized release. Therefore, in the long-term perspective, the iron ore short-term thinking remains unchanged, and the rallies are short.

1. The strategic logic of “short-term multi-iron ore 2001”: the mature material demand ushered in the peak season, the black system oversold and rebounded; the short-term supply and demand margin improved, the steel mill replenished the warehouse to promote the price of the mine; the face faced a certain discount than the spot, there existed Do more safety margins. Risk point: terminal demand in the peak season is less than expected; production is expected to exceed expectations; iron ore supply has risen sharply

2. The strategy logic of “medium or long-term short iron ore 2001”: iron ore supply increased by a large margin; real estate investment inflection point appeared, medium and long-term steel demand weakened, black price overall pressure; market sentiment and risk preference weakened

Risk point: iron ore supply is less than expected; favorable policies for downstream steel products are introduced, demand for finished products is good, and finished product prices continue to rebound

In August, under the dual negative effects of macro and industry, iron ore ended its eight-month rally, and the price turned head down. There was a sharp drop, and the 62% iron ore general index fell by 31.2%. In September, the macro pessimistic expectations have been repaired, and the demand for the terminal peak season has been gradually released. The finished materials are accelerated to the warehouse. After the steel price stabilizes, the iron ore ushers in the replenishment market, and the short-term iron ore bottoms out. In the later stage, the iron ore price will go from the perspective of supply and demand, analyze the basic situation of iron ore, make a rough judgment on the price trend of the January contract, and further propose relevant investment strategies.

01 The four major mines increased their supply in the second half of the year, and the supply pressure in the fourth quarter was the biggest.

According to the production and sales reports issued by the four major mines, the output of the four major mines in the second half of 2019 increased significantly, but the increase was limited. In the first half of 2019, due to the impact of the Brazilian mine disaster and the Australian hurricane, the total shipments of the four major mines were 51.273 million tons, down 51.35 million tons. In the second half of the year, with the resumption of production of VALE and the reduction of weather disturbances, the production and sales of the four major mines will rebound significantly. According to the annual production and sales plan of the mine, the supply of the four major mines in the second half of 2019 was 582.46 million tons, an increase of 69.73 million tons from the previous month and an increase of 860,000 tons. Combined with the proportion of China's four major mines to China, it is estimated that China's imports from the four major mines will increase by 50.49 million tons in the second half of the year, an increase of 3.93 million tons.

From the perspective of the delivery rhythm, the supply pressure in the fourth quarter is greater than the third quarter. Due to the weather, in the 1st to 4th quarters, the shipments of the four major mines gradually increased, reaching the high point of the year in the fourth quarter. BHP and Rio Tinto had major overhauls in September and October respectively. The supply pressure in recent months was less than that in the distant months.

02 mine price fell, internal mine supply contraction

In terms of internal mines, with the fall of the mining price, the mining power decreased, superimposed on the 70th anniversary of the founding of the People's Republic of China in October, the environmental protection is stricter, and the supply of minerals contracted in August. As of August 30, the utilization rate of 266 mines was 65.84%, a decrease of 0.93 percentage points from the previous month, an increase of 1.14 percentage points year-on-year, and a decrease year-on-year; the average daily output of 266 mine iron fines was 415,400 tons, compared with the previous month. It was reduced by 0.58 million tons, down by 0.16 million tons.

Due to the shortage of rich ore, the shortage of rich ore, the high quality veins are becoming scarcer, the mining depth is increased, the mining cost is increased, and the environmental protection and security inspection are superimposed. The mining cost is much higher than that of the four major mines. According to the research of the Steel Association, the average cost of China's domestic mines in 2017 was 484 yuan / ton. With the fall of the mine price, the profit of high-cost mines contracted sharply.

03 Long-term steel demand weakened, steel mill iron ore replenishment

For raw iron ore, the demand of the steel mill can be divided into two parts, one is rigid demand and the other is replenishment demand. Environmentally limited production is the main variable affecting the rigid demand of iron ore. From the limited production situation in September, Tangshan's limited production was less than expected, and iron ore rigid demand rebounded. As of September 6, 163 steel mills' blast furnace operating rate was 68.23%, up 0.96 percentage points from the previous month. Mysteel surveyed 247 steel mills with an average daily iron ore output of 2,319,600 tons, an increase of 25,400 tons from the previous month. In September, affected by the 70th anniversary of the founding of the People's Republic of China, Tangshan's production is expected to continue, and iron ore consumption is unlikely to increase significantly.

On the other hand, steel prices and steel mill profit levels are important factors influencing iron ore replenishment. In the short-term, the previous steel prices fell sharply and released certain negative factors. The short-term production cuts led to a significant contraction in steel output. The peak demand for superimposed terminals is coming, steel is accelerated to the warehouse, and steel prices are stable, which is conducive to iron ore replenishment. However, the active production reduction is only temporary. Even if the production is limited, as long as the steel mill has profit, by increasing the proportion of the use of lump ore, pellets and scrap, the steel output will not drop significantly, and the rest of the unrestricted areas will generally increase production. Will remain at a higher level. And the end of the 70th anniversary of the founding of the People's Republic of China in October, the steel output is expected to rebound significantly, in the context of weaker long-term demand, the end of the peak season, the steel sales pressure in the fourth quarter is highlighted, the downward trend of steel mill profits does not change. In response, steel mills adopt a low raw material inventory strategy, and iron ore demand is difficult to concentrate on.

Imported mineral inventories are currently significantly lower than the same period last year. As of August 28, Mysteel reported that the total inventory of sintered powder imported by 64 steel mills was 148.8666 million tons, a decrease of 556,200 tons from the previous month, a decrease of 4,919,800 tons compared with the same period of last year, a decrease of 22% year-on-year; the average available days of imported mines was 24 days. The month was reduced by 5 days compared with the previous month.