Mines and steel mills have entered a new round of "games." The price of iron ore contract should have been determined in the near future, but there is no news. A senior steel mill in East China revealed that although the price of Japan and South Korea has been confirmed, the price of the three major mines is too high, and there is no final consensus with many steel mills.
The above-mentioned person told the author that the company is currently in a meeting to discuss and hope to find some methods, such as adjusting the ratio of inventory allocation and spot mine purchase, thus reducing the cost risk.
"It is not necessary to give up the contract with the three major mines and completely turn to the spot." The person admitted that in the current situation, large steel mills will not choose to "turn their faces" with the mines, because the contract mines are more stable than the spot supply. However, the current steel market is very poor, especially steel mills are losing money, and controlling costs is particularly important.
The signal from the market is that due to the fall in steel prices, iron ore has been falling for more than two months since May, and the current spot price is 122 to 123 US dollars / ton. According to the agreement that Japan, South Korea and the three major mines have risen by 23% to 26%, the price of the long-term coal mine in the third quarter is about 140 US dollars/ton of FOB, that is, the landed price is about 150 US dollars/ton, which is better than China. Spot mine prices are nearly $30/ton higher.
For most steel mills, in the second quarter, when the contract price has already been higher than the spot price, the price of the ore contract that continues to accept the rise in the third quarter appears to be very “incapableâ€. It is understood that Baosteel, Anshan Iron and Steel and Other large and medium-sized steel companies introduced the August ex-factory price policy to various degrees of various products to 200 to 500 yuan / ton to varying degrees of varying degrees, some products have been in a state of loss, has emerged Production cuts and maintenance will have to be gradually expanded in the later period.
In addition to China's largest customer, the global steel industry has also sent a worrying voice. It is understood that US steel prices plummeted in June, and US steel companies are currently reducing production to respond. According to a report by The Wall Street Journal, it is expected that US steel prices will fall, and at least for a long time in the summer. ArcelorMittal, the world's largest steel producer, is planning to cut production at the Indiana Steel Plant. At the same time, Russia's Northern Steel Company (Severstal) operates a number of steel plants in the United States, which is expected to shut down its blast furnace in Maryland this month due to slower demand.
All kinds of signs are inciting the absolute right of the three major mines on iron ore. Rio Tinto CEO Ai Boinian said in the second quarter results released on the 14th that although the company's full-year iron ore production target remained at 234 million tons, the economy's second recession in developed countries and China's economic growth In the immediate slowdown, the global economy is facing a new round of development uncertainty. In fact, Rio Tinto's iron ore production in the second quarter fell 2% year-on-year to 43.6 million tons. As of press time, Vale and BHP Billiton did not publicly comment on production and market.
"In the environment of falling iron ore prices, the index pricing mechanism will do more harm than good for the three major mines." Industry insiders said in an interview that the three major mines changed the previous pricing mechanism and turned to flexible quarterly and index pricing mechanisms. This also means taking more risks from market changes. Judging from the current situation, in the case of widespread losses in steel mills, the high price in the third quarter may force steel mills to cut production or partially switch to domestic mines.
On the other hand, even if the steel mill accepts the high price in the third quarter, the overall loss of the industry will continue to lower the price of spot mines. According to the previous game rules, the three major mines will determine the fourth quarter according to the average price of the spot index in the third quarter. The contracted mine price, which also means that the contract price in the fourth quarter will drop sharply. At that time, the mine may have to taste the "bitter fruit" brought about by the change of pricing mechanism.
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