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Haihao Group vigilant amidst surging iron ore prices

Haihao Group vigilant amidst surging iron ore prices

In recent times, the relentless surge in iron ore prices has captured the attention of industry players. On November 15th, the price of the main contract for iron ore futures surged to a peak of 995 RMB per ton, nearly breaching the significant mark of 1000 RMB per ton, marking a new high since July 2021. As the mineral price escalates rapidly, the Haihao Group is here to decipher the reasons behind this trend.

Reasons Behind the Recent Surge in Iron Ore Prices:

Macro Perspective: Incremental Policy Stimulus and Eased International Pressures

Iron ore prices are strongly driven by macroeconomic factors. In late October, the issuance of 1 trillion RMB in national bonds ignited optimistic expectations in the market due to a relaxed fiscal policy. In November, the U.S. Federal Reserve once again paused interest rate hikes. The National Day holiday saw a continuous decline in oil prices, coupled with marginal weakening of U.S. economic data, driving a significant fall in long-term yields of U.S. Treasury bonds. This created a window for a rebound in risk assets. Simultaneously, the amelioration of tensions between China and the U.S. led to a noticeable rise in risk asset preferences, propelling the upward trajectory of commodity prices, including iron ore.

Haihao Group

Haihao Group

Industry Perspective: Resonance in Raw Material and Steel Prices

Boosted by optimistic macro expectations, steel prices have strengthened, contributing to a recovery in steel profits. Short-process steel mills have significantly increased their operating rates, while long-process steel mills have experienced a slight decline due to routine maintenance in some regions. The trend in “double coke” prices has been particularly strong, influenced by coal mine accidents.

Supply and Demand Dynamics for Iron Ore:

Iron ore, in terms of its own fundamentals, exhibits relatively strong supply and demand dynamics, providing a speculative space for the price surge. However, due to the previous rapid and excessive increase in iron ore prices, regulatory pressure escalated, leading to a phased retreat in market prices.

Financial Perspective: Recent Contracts Trading at a Premium

In November to December, the 2401 contract of iron ore futures entered a period of price convergence between futures and spot prices. From October 23rd to November 23rd, iron ore futures and spot prices resonated upward. However, futures prices rose more significantly. The Platts iron ore price index increased by $19.55 per ton to $134.80 per ton, a surge of 16.96%. Karagasa powder prices at Rizhao Port rose by 100 RMB per ton to 1088 RMB per ton, an increase of 10.12%. The price of the main contract (2401 contract) for iron ore futures rose by a maximum of 153.5 RMB per ton to 988.5 RMB per ton, an increase of 18.38%. Simultaneously, the rollover and shift of funds in the main contract of iron ore futures (2401 contract) also contributed to the significant price increase.

As the Haihao Group keeps a vigilant eye on the dynamic shifts in the steel and iron ore market, they remain committed to understanding and adapting to the ever-changing landscape of raw material prices. The group is poised to navigate these challenges strategically, ensuring stability and sustainability in their operations.