The imported iron ore broke through one billion tons for the first time. Can domestic ores defeat the four oligarchs in 2017?
At 21:00 on December 31, 2016, as the "ERBERGAMO" ship carrying 56000 tons of iron ore from Tamra Port in India slowly sailed into the anchorage of Qingdao Port, China's import of iron ore by sea in 2016 officially ended.
According to the data, in 2016, the arrival of China's seaborne iron ore reached a record 1017.79 million tons, an increase of 4.68%, which is the first time that the arrival of China's seaborne iron ore exceeded 1 billion tons. In 2015, the data was 9722.8 million tons.
1、 Reasons for the increase of iron ore arrivals
The main reason for the increase of iron ore arrivals in 2016 is that China has a huge demand for iron ore, and China's crude steel output in 2016 has increased compared with that in 2015; The dependence on foreign countries of iron ore continues to increase, exceeding 84% in 2015, and will continue to increase in 2016, further squeezing the domestic ore market; The port inventory at the end of 2016 was somewhat higher than that at the end of 2015; In 2016, the market price continued to rise, and the stock of steel enterprises and trade links also increased to a certain extent.
In 2016, the iron ore inventory of 41 major ports across the country remained above 100 million tons after entering the late April, and the port inventory reached 111.65 million tons by the end of December, up 12.7% from 99.06 million tons at the beginning of the year.
In 2016, the rebound of domestic steel prices led to higher ore prices, and the increase of steel plant operating rate increased the demand for iron ore. At the same time, the four major international mines released capacity one after another, and the inventory of domestic iron ore ports also increased.
2、 "Account book" of iron ore in 2016
① The accumulated license issued is 1346.6842 million tons, with an amount of USD 75.974 billion and an average price of USD 56.42 per ton;
② The accumulated customs clearance volume was 939.1402 million tons, amounting to 52.69 billion US dollars;
③ The average ocean freight price is 13.58 USD/ton.
1. Ocean freight of iron ore
From January to December 2016, the average import ocean freight of iron ore was 13.58 US dollars/ton.
Among them, the average import ocean freight of Australia is 12.77 dollars/ton, the average import ocean freight of Brazil is 15.04 dollars/ton, the average import ocean freight of South Africa is 12.48 dollars/ton, the average import ocean freight of Myanmar is 3.48 dollars/ton, the average import ocean freight of India is 14.9 dollars/ton, and the average import ocean freight of Indonesia is 9.62 dollars/ton.
2. Iron ore price
In December 2016, the iron ore market was consolidated and operated, and the price of iron ore hit $83.75/t at the highest and $78/t at the lowest.
3. Operation of domestic iron ore
Since many of China's high cost iron ores are not competitive with imported iron ores, many mines were forced to close, and China's raw iron ore output fell by 8% year-on-year from May to July 2016.
After converting the iron ore grade, China's iron ore output is expected to decline by 12% year-on-year in 2016, and will further decline by 20% in 2017. The continuous shutdown of high cost iron ores and the closure of some loss making state-owned steel mills have led to a decline in China's domestic iron ore production.
According to China Metallurgical and Mining Enterprises Association, 780 iron ore enterprises in China have withdrawn from the market in the first three quarters of 2016, accounting for 1/3 of the total iron ore enterprises. Since 2012, domestic iron ore production has declined by 47%.
3、 Iron ore market forecast in 2017
Looking back at the market in December 2016, the demand for steel decreased significantly, the inventory increased, and the prices of coal and coke fell in the context of supply side structural reform. Although the supply side and inventory side of iron ore still maintain a high level, the structural contradiction is still prominent, and the spot price decline space is relatively limited.
The authoritative personage of CISA pointed out that in 2017, under the overall macro situation and market situation, the downward pressure on economic growth was great. It is estimated that China's steel demand in 2017 will be about 660 million tons, down 1.5% year on year.
From the current situation, on the whole, China's iron ore imports in 2017 may decline slightly compared with 2016, mainly because China's crude steel production and consumption are expected to decline slightly in 2017; The possibility of further increase of port inventory is low; Domestic mines have been compressed to the limit.
In 2016, the output of domestic iron concentrate powder declined significantly, and the operating rate of domestic mines continued to decline. However, affected by the rising price of iron ore in the second half of the year, some domestic closed mining enterprises began to get excited and their willingness to resume production continued to increase. If the price of iron ore can be maintained at 70-80 yuan/ton, it is estimated that the recovery rate of domestic mines will still increase in 2017.
From the perspective of foreign mine supply, Vale launched its largest iron ore project S11D at the end of 2016. It is reported that the annual iron ore production capacity of the project will be 90 million tons, and the project is expected to produce 30 million to 40 million tons of iron ore in 2017. BHP Billiton will also continue to increase its supply. In 2017, under the premise of slowing demand in China, the four major mines still have no expectation of reducing iron ore supply.
（2） Import volume
In 2017, the import volume is expected to increase moderately, with an estimated increase of 40 million tons to about 114000. It is estimated that the export volume of Australian iron ore in fiscal year 2016/17 (as of June 30, 2017) will increase by 8% year-on-year to 851 million tons, and the export volume of Australian iron ore in the same period will increase by 12% year-on-year to AUD54 billion.
Compared with the previous forecast, Australia's iron ore export volume has increased, mainly due to the rise in iron ore export prices in the third quarter of 2016.
（3） Marine market
The expected slowdown of global economic growth in 2017 and the slowdown of emerging market economic growth will aggravate overcapacity, and a variety of unstable factors will lead to the decline of freight.
The weakness of growth demand will lead to excess transport capacity, which will become a key factor hindering the prospects for the recovery of the shipping industry, and the growth of freight will be further pressured.