The price of iron ore under “Combination boxing”
On August 23, the Canadian Mining Network published an article by Reuters columnist Clyde· Russell, saying that since the record high on May 12 this year, iron ore prices have begun to soar and have fallen so far. 32.1% to 44%. In the past month, the value of iron ore has fallen by about a quarter.
Prior to this, the price of iron ore soared. Clyde · Russell analyzed the reasons as follows: “The record-breaking growth does have its fundamental driving factors, that is, due to the impact of the epidemic, the production of major iron ore exporting countries such as Australia and Brazil is under-started and the supply is insufficient. Limited, and China’s demand is strong. According to the analysis, “China's infrastructure and real estate industries account for 20-25% and 25-30% of steel demand, respectively. Coupled with manufacturing demand, China has purchased almost 70% of the world’s seaborne iron ore". This "manufacturing demand" is actually China acting as the "world's factory", using mineral products including iron ore to produce all kinds of products needed by various countries.
According to the assessment by Argus, the commodity price reporting agency, in the short seven weeks from March 23 to May 12 this year, the spot price of iron ore shipped to North China rose by 51% to US$235.55 per ton. A record high. Regarding such a surge, even Argus lamented: Although from a fundamental point of view, the subsequent spot price plummeted 44% to a recent low of US$131.80 per ton which may be unreasonable, but the surge at that time was far more basic than the market. The bubble that the face thinks is bigger.
According to media reports, iron ore prices have rebounded recently. According to data from Fastmarkets MB, on August 24, the benchmark 62% iron powder imported into northern China changed hands at a price of US$146.13 per ton, an increase of 7.3% from the previous day's closing price. In Dalian, rebounding from the 7-and-a-half-month low hit on August 20, the iron ore contract for January 2022, the most traded in volume, rose 6.2% to 817.50 yuan per ton. Singapore futures rebounded as high as 10%.
Based on this, CRU Group analysts speculated that after the slowdown in credit and economic growth in July, China may “take further stimulus measures” to the economy, such as relaxing restrictions on crude steel production.
In fact, this is entirely a subjective conjecture.
According to data from the China Iron and Steel Association, in late July, the key statistical steel companies produced 2.1665 million tons of crude steel per day, a decrease of 3.97% from the first half of July and a year-on-year drop of 3.03%. This is the first time this year has fallen below the level of the same period last year. There may be a further decline in August. Xinhua News Agency reported on August 16 that the average daily output in early August was only 2.04 million tons. At the same time, iron ore imports hit a record low.
The latest data from the World Steel Association show that in July 2021, the world crude steel output in 64 countries was 161.7 million tons, an increase of 3.3% year-on-year. China’s crude steel output in July fell to the lowest level since April 2020. 86.8 million tons, down 7.6% from June and down 8.4% year-on-year.
We know that in China, the steel industry is a basic industry. In order to meet China's modernization and China's huge demand for steel and other materials as a "world factory", we must ensure the appropriate scale of the steel industry. However, it should also be noted that the steel industry used to have a low degree of concentration, and crude steel production is "flowering everywhere", of which a large proportion belongs to excess capacity. To produce these crude steels, it not only consumes a large amount of iron ore (or scrap steel), but also causes environmental pollution. In fact, the relevant departments have been aware of this problem very early, but after several rectifications and repeated actions, it is unsatisfactory. In addition to the inadequate understanding of the implementation of the new development concept and promotion of the transformation and upgrading of the mining industry in some places, the constraints of the institutional mechanism and the pressure of economic development and employment are also important reasons.
For China, the iron ore issue is not simply a price issue, but behind it is the issue of the scale of the steel industry, the quality of its development, and whether it can build a green, safe, harmonious, intelligent and efficient modern mining industry. Of course, it also involves the question of whether the "double carbon" goal can be achieved. Therefore, to solve the iron ore problem is actually to seize the source, and then solve the problem of the steel industry and the entire industry chain of the mining industry. To solve this "old difficulty" problem, especially to prevent excessive fluctuations in iron ore prices, in general, there are several necessary conditions: one is the integration of resources and the increase in the concentration of the steel industry; One is to limit production, mainly crude steel production; the other is to reduce imports and increase the self-sufficiency rate of iron ore, including the use of scrap steel.
The multiple meanings of steel industry integration
On August 20th, the Ansteel Group's reorganization meeting of Bengang Group was held, and Ansteel's reorganization was officially launched. According to the agreement, the State-owned Assets Supervision and Administration Commission of Liaoning Province will transfer its 51% stake in Bengang Group to Angang Group for free. In other words, after the completion of the free transfer, Ansteel Group will hold 51% of the shares of Bengang Group, and Bengang Group will become the holding subsidiary of Angang Group. This means that after "Baowu", with the participation of the central state-owned enterprise Anshan Iron and Steel, another major "steel giant" turned out.
Industry experts believe that it is understood that Anshan Iron and Steel has a complete product series such as general steel, special steel, stainless steel, vanadium and titanium, and its profit in 2020 will be the best in history. In the first half of 2021, the total profit will exceed 20 billion yuan, and the sales profit rate will reach the industry. Two times the average level, the debt-to-asset ratio is lower than the average level of central enterprises and the industry, and the international rating is investment grade. Benxi Iron and Steel is the largest provincial state-owned enterprise in Liaoning Province, with rich mineral resources, first-class technology and equipment, the world's widest continuous hot rolling unit, world-class cold rolling production line, and a crude steel production capacity of 20 million tons.
But on the other hand, Anshan Iron and Steel's main production base in Liaoning is adjacent to Benxi Iron and Steel, and its resource endowments, production line allocation, and product structure are relatively similar. This has caused serious disorderly competition between the two companies for a long time, "involution". ; Lower the competitiveness of the two companies.
In the face of this situation, Liaoning Province has long intended to build this pillar industry into the Northeast "Steel Aircraft Carrier", forming a pattern of "Baowu in the south and Anshan Iron and Steel in the north", thereby further strengthening the industry's right to speak and dominate. .
The industry is generally optimistic about this integration. Tan Chengxu, Chairman of Ansteel Group, said that after the implementation of the reorganization, we will give full play to the synergies of each other in terms of strategy, resources, R&D, procurement, sales, logistics, etc., accelerate the unified production capacity layout, avoid repeated investment and construction, and effectively promote the upgrading of technology and equipment and the optimization of product structure. Enhance the concentration of the iron and steel industry, promote the optimization and structural adjustment of the iron and steel industry, maintain the safety and stability of the supply chain of the iron and steel industry chain, and promote the high-quality development of the iron and steel industry.
According to reports, after the reorganization, Anshan Iron and Steel will become the world's third largest steel company, second only to China Baowu and ArcelorMittal. Anshan Iron and Steel stated that "New Anshan Iron and Steel" will take the development strategy of "7531" (70 million tons of crude steel, 50 million tons of iron ore concentrate, 300 billion-level operating income, and tens of billions of profits) as the goal, and will further consolidate and strengthen The advantages of the whole industry chain and the smooth dual-cycle development blockage point have become the "ballast stone" that guarantees the security of national strategic resources, thereby building Anshan Iron and Steel into a world-class enterprise with global competitiveness, and building Benxi Iron and Steel into a highly competitive international Strong automotive steel and special steel bar and wire production base.
The meaning is more than that.
As we all know, the iron and steel industry is the foundation of the country's industry, and iron ore is the main raw material for the iron and steel industry. At present, China's dependence on foreign iron ore has reached more than 80%, which is the weakness and risk point of the development of China's steel industry. For a period of time, due to the need for large amounts of imports, iron ore has become a "killer feature" for foreign mining giants to ask Chinese companies sky-high prices.
It is understood that after years of operation, Ansteel Group Mining Company owns iron ore resources in Liaoning, Sichuan, and Carrara, Australia, with a scale of 8.8 billion tons. International trade capabilities. The company has 280 million tons/year stripping production capacity and 65 million tons/year beneficiation capacity; the overseas Carrara iron ore base has an annual production capacity of 8 million tons. Bengang Group also has 1.05 billion tons of iron ore resource reserves, with an annual production capacity of 25 million tons of iron ore, 8 million tons of iron ore concentrates, and 2 million tons of pellets.
If so, it is self-evident that the reorganization of the two major steel companies will reduce their dependence on foreign iron ore, and relevant experts also expressed their high affirmation. Liu Jie, an academician of the Chinese Academy of Engineering, said that after the reorganization, through the use of Anshan Iron and Steel's relatively advanced mining and dressing technology advantages and mine construction capabilities, the dependence on imported iron ore can be effectively reduced. Li Xinchuang, vice chairman of the China Iron and Steel Association, secretary of the Party Committee and chief engineer of the Metallurgical Industry Planning and Research Institute, said that the iron ore resources in Anben area are rich. Stone output and domestic self-sufficiency rate allow domestic iron ore resources to truly play the role of "ballast stone". Wang Guoqing, director of the Lange Iron and Steel Research Center, also said that after the reorganization, Anben possesses nearly 10 billion tons of iron ore resource reserves. Through overall planning and technological complementation, the development of domestic iron ore resources will be accelerated and the domestic iron ore will be improved. Stone resource guarantee capability.
There are deeper strategic considerations
In October 2020, the International Energy Agency (IEA) released the "World Energy Technology Outlook 2020—— Steel Technology Roadmap", in which the baseline scenario forecast (STEPS), by 2050, global steel demand will be 1.85 billion tons in 2019 Based on the increase of 40% to 2.55 billion tons; and the Sustainable Development Scenario (SDS), in order to achieve the 2.0 ℃ temperature control target of the Paris Agreement, global steel demand can only increase by 10% by 2050 to 20.3 100 million tons; the total direct carbon emissions of the global steel industry in 2050 will be reduced by 55% compared to 2019, so the carbon emission intensity of steel production must be reduced by 60% by 2050, that is, carbon emissions per ton of steel will be reduced from the current 1.4 tons to 0.6 Ton.
Mining consulting agency Wood Mackenzie (Wood Mackenzie) also pointed out in its latest basic situation report that "7% of the current global carbon dioxide emissions are caused by steel. If 2°C, which is consistent with the Paris climate agreement, is to be achieved, the industry needs to prioritize decarbonization. To this is a very challenging goal. The road to the 2°C world is full of thorns, and the steel industry needs to find the right balance between increasing demand and pressure for decarbonization. ”To limit global warming to less than 2°C, the carbon emissions of the steel industry must be reduced by 75% from the current level, which means that global steel emissions will increase from 2020’s 3 billion tons of carbon dioxide equivalent (Mt CO2 ) Reduce to 780 million tons of carbon dioxide equivalent in 2050.
Wood · MacKenzie also introduced five measures that the steel industry needs to take to achieve the 2°C target: double the amount of scrap used in steelmaking; triple the production of direct reduced iron (DRI); and increase the global average electric arc Reduce the emission intensity of the furnace (EAF) by 70%; reduce the emission intensity of the blast furnace-alkaline oxygen furnace (BF-BOF) by 30%, which is close to its theoretical minimum; capture and store 45% of the remaining carbon emissions (approximately 500 metric tons per year) .
In fact, in order to achieve the goals set by the Paris Agreement, the international steel industry and companies have set their own schedules: The European Steel Federation proposes that by 2030, the European steel industry’s carbon emissions will be reduced by 30% compared to 2018. By 2050, it will be reduced by 80%-95% compared to 1990. The Japan Iron and Steel Alliance proposes that by 2050, the Japanese steel industry will achieve zero greenhouse gas emissions from the ironmaking process, reduce carbon emissions by 30%, and achieve "zero carbon steel" production by 2100. The South Korean Iron and Steel Industry proposes to reduce carbon emissions from the initial 135.7 million tons to 127.1 million tons by 2030.
China is a major carbon-emitting country in the world, and steel is one of the major carbon-emitting industries. According to Global Carbon Project statistics, in 2019, the total global CO2 emissions related to energy and cement were about 36.4 billion tons, and China accounted for 10.17 billion tons, accounting for about 28%, exceeding the sum of the United States, Europe and Japan. According to data from the Ministry of Ecology and Environment, in 2018, China’s steel industry’s emissions of particulate matter, sulfur dioxide, and nitrogen oxides were about 1.636 million tons, 683,000 tons, and 929,000 tons, respectively, ranking first among all industrial sectors; carbon emissions were only lower than the power industry , In second place.
Faced with the pressure of carbon reduction in the steel industry, the reorganization of steel companies will help unify carbon reduction measures, accelerate the progress of the company’s monitoring and rectification of carbon emissions, and help achieve the national goal of "carbon neutrality and carbon peak". . Therefore, since 2019, China's steel industry has accelerated a new round of mergers and acquisitions. In June 2019, China Baowu, the largest domestic steel company, implemented the reorganization of Maanshan Iron and Steel Group. In August 2020, China Baowu implemented a joint reorganization of Taiyuan Iron and Steel, and completed the ownership of Chongqing Iron and Steel at the end of 2020. This year, 7 In September, China Baowu and Shanxi Iron and Steel Group confirmed the reorganization. Together with the reorganization of Anshan Iron and Steel and Benxi Iron and Steel, the pace of reorganization of central enterprises and local state-owned enterprises has been significantly accelerated, and the concentration of the steel industry has been effectively improved.
According to the "Guiding Opinions on Promoting the High-Quality Development of the Iron and Steel Industry" by the Ministry of Industry and Information Technology, by 2025, the industry concentration of the top 10 iron and steel enterprises will reach 60%. After Anshan Iron and Steel reorganizes Benxi Iron and Steel, the concentration of the steel industry in Liaoning will reach 70%, and the concentration of the steel industry in Northeast China will reach 50%, which will help the region to quickly achieve the goal of concentration of the steel industry.
Experts predict that during the "14th Five-Year Plan" period, the concentration of steel enterprises will reach a levelThis new level can better promote the upgrading of the steel industry and the innovation of the steel enterprise system, cultivate a healthier and orderly market system, and better leverage the advantages of state-owned steel enterprises to reduce carbon emissions, peak carbon, and carbon neutrality for the Chinese steel industry. Provide strong support.
Therefore, it is not difficult for us to understand why China should reduce its dependence on foreign iron ore and why it should restrict the disorderly growth of steel, especially crude steel output.
