2024 Second Half of the Year Import Iron Ore Continues to Maintain a Strong Supply and Weak Demand Pattern
Jul 12, 2024
The first half of 2024 witnessed a fluctuating trend in imported iron ore prices, which initially declined, then rebounded, and finally fell again, ending the period lower than at the beginning, reflecting a slight overall decrease. As of June 28, the 62% Australian fines futures price index stood at $106.6 per dry metric ton, a decrease of 25.45% from the beginning of the year, while the 62% port spot price index was at 107.79 yuan/ton, down by 23.06% from the start of the year. The port spot price drop was less than that of the futures, leading to varying degrees of expansion in import profits for different grades. Concurrently, the Shanghai rebar price was 3480 yuan/ton, with a 13% decrease from the beginning of the year, showing that the finished product price drop was less than that of iron ore, indicating a weaker ore and stronger materials market situation. The basic supply and demand situation for iron ore in the first half of the year was characterized by a strong supply and weak demand pattern.
The iron ore price in the first half of 2024 traced an inverted "N" shape, with a general downward trend, where the iron ore price drop was greater than that of the finished products. The 62% Australian fines index recorded a total drop of 25.45%, while the Shanghai rebar price saw a total decrease of 13%. As of June 28, the 62% Australian fines index was at $106.6 per dry metric ton, the 62% port spot index was at 107.79 yuan/ton, and the Shanghai rebar price was at 3480 yuan/ton.
During this period, the 62% Australian fines index fell from the highest annual price of $143 per dry metric ton to the lowest of $97.45 per dry metric ton, a drop of 32%. The iron ore price repeatedly fell due to the dual impact of supply exceeding expectations and demand recovery not meeting expectations. Additionally, the slow pace of resumption of production and work in the terminal real estate and infrastructure sectors led to negative feedback from finished products to raw materials, causing iron ore prices to fall from the highest level of the year to the lowest.
The 62% Australian fines index rebounded from $97.45 per dry metric ton to $122.45 per dry metric ton, a rebound of 26%. Macroeconomic benefits and the release of real estate relaxation policies led to a significant improvement in terminal demand, with finished products maintaining a reduction. On the demand side for iron ore, pig iron maintained an upward channel, market sentiment improved, trading activity increased, and iron ore prices rebounded.
From $122.45 per dry metric ton, the 62% Australian fines index adjusted to $106.6 per dry metric ton, an adjustment of 13%. At the end of May, the State Council mentioned the strict implementation of steel capacity replacement, and the continuation of crude steel production control in 2024, leading to a decline in iron ore prices. Entering June, with a reduction in macroeconomic good news and the iron ore trading logic gradually shifting to a weak fundamental, coupled with the obvious seasonal off-season characteristics of terminal demand, iron ore prices fell further.
In the first half of 2024, the total global iron ore shipments amounted to 786 million tons, an increase of 34.78 million tons year-on-year, an increase of 4.6%. Among them, the shipments of Australian iron ore in the first half of the year were 466 million tons, a decrease of 100,000 tons year-on-year, while the shipments from Brazil were 178 million tons, an increase of 11.75 million tons year-on-year, and shipments from other countries were 143 million tons, an increase of 23.14 million tons year-on-year.
The reasons for this situation mainly lie in: the Australian mines were affected by weather and accidents in the first half of the year, coupled with the new production projects in Australia not reaching the expected capacity; Brazil was relatively less affected by weather, and the mines increased capital expenditure on facility upgrades and maintenance, helping to increase production and shipments; the impact of accidents and geopolitical conflicts on non-mainstream countries has relatively weakened, with Ukraine, South Africa, and India contributing significantly to the increase.
According to the Mysteel 247 blast furnace pig iron data, the total pig iron production in the first half of the year reached 415 million tons, a decrease of 14.46 million tons year-on-year, a drop of 3.36%, with an average daily pig iron production of 2.2821 million tons/day, a decrease of 92,500 tons/day year-on-year. It is clear that this year's pig iron production has been relatively weak compared to the same period last year, mainly due to poor performance in the downstream demand side. The inventory of finished products only began to decrease in mid-March this year, later than most years. At the same time, the increase in inventory pressure has led to increased losses for many steel mills, and the frequency of blast furnace maintenance has increased. Compared with the decline in crude steel in the first half of the year, it was found that the decline in pig iron was higher than that of crude steel, largely due to a significant recovery in scrap steel consumption this year.
In the first half of 2024, the port inventory of imported ores first accelerated to a high level compared to the same period in the past three years, and then fluctuated at a high level. This year, the global iron ore supply and the annual comparison of China's iron ore arrivals have maintained a large increase, while pig iron production has been relatively weak year-on-year, so the port iron ore inventory level has expanded year-on-year in January-March, and from April to June, it has shown a continuous high level contrary to the trend of the previous two years.
According to the seasonal pattern, the iron ore shipments in the second half of each year are higher than in the first half. Based on historical data, the second half of 2021 increased by 38.533 million tons compared to the first half, the second half of 2022 increased by 55.696 million tons, and the second half of 2023 increased by 75.493 million tons. This seasonal characteristic will continue this year. Considering the pace of new iron ore production projects globally and the annual sales and shipment targets of mines, it is expected that the iron ore shipments in the second half of this year will be 60.154 million tons higher than in the first half.
In the first half of the year, the domestic concentrate production was affected by previous accidents and weakened. Except for the Shanxi region, which is unlikely to resume production this year, some mines in Hebei have started to resume work. There were limited new production projects in the first half of the year, with a year-on-year increase of about 4.3 million tons in domestic concentrate production from January to May. In the second half of the year, despite the impact of winter mining difficulties and other factors, it is expected that some suspended enterprises will resume normal production, and there will be new production projects in the second half of the year. In summary, it is expected that there will be an increase of 2 million tons in domestic concentrate content in the second half of the year.
In the first half of the year, China's pig iron production decreased by 14.45 million tons year-on-year. For the calculation of iron ore demand in the second half of the year, four aspects need to be considered: first, the possibility of crude steel control policies being implemented in various regions within the year; second, the lack of domestic real estate policy drive; third, local efforts to resolve debt risks, and the slowdown in the development progress of infrastructure projects; finally, the United States, the European Union
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