Direct connection between international mines and users will be the trend
Since early March, China's iron ore port inventories have reached the 130 million ton mark. So who bought the 130 million tons of ore? This has led to such a large increase in iron ore port inventories.
According to statistics, among the 130 million tons of iron ore, about 61% of the iron ore or rights belong to traders; generally we call it trade ore, which represents resaleable iron ore.
The remaining 39% belong to non-trade mines, and their cargo owners are mainly steel mills; it should be pointed out that this part of the inventory may also be taken out for resale.
After entering the beginning of March, the inventory of port trade mines reached nearly 86 million tons, accounting for 66% of the port inventory.
At this time, traders began to consciously control the growth of inventory scale, and the scale of trade inventory basically remained at a stable level throughout March.
We have reason to believe that after entering March, high port inventories made traders begin to realize the existence of the crisis and began to consciously control the pace of purchases.
1. The Golden Decade 2002-2012
Spot iron ore prices from 2003 to 2013 (USD/ton)
1. The soil where traders grow wildly
2002-2012 was a golden decade for the rapid development of China's iron ore. With the crazy rise in iron ore prices, a large number of iron ore traders were created.
However, since the end of 2003, when Baosteel Group, as the negotiator of China's iron and steel industry, conducted iron ore negotiations, the outside world and the industry once labelled iron ore traders as "bad guys".
Stimulated by China's increasingly boiling steel industry and the "dual-track system" of imported iron ore, the team of iron ore dealers has become stronger and stronger.
The dual-track system of iron ore prices refers to two pricing models for domestic iron and steel enterprises to purchase iron ore from foreign iron ore enterprises:
(1) The long-term agreement price (long-term agreement price) is unique to some qualified enterprises.
(2) The spot price, the price is higher than the long-term agreement price, and it is not qualified and used by small enterprises.
The existence of the pricing mechanism of spot price provides soil for the survival of iron ore traders. Therefore, in the golden decade, traders tried their best to obtain a few shipments of iron ore through various channels and shipped it to China. Make a lot of money.
2. "Hosts" of traders
Small and medium iron ore traders have always depended on big miners and domestic steel mills to survive.
If traders have the support of steel mills, especially large state-owned steel mills, it is easier to directly sign long-term contracts with mines.
An expert from the China Iron and Steel Association used "parasitic" to describe the relationship between traders and steel mills. "Their cost is basically diplomatic cost and relationship cost."
3. "Gambler" traders
In those two years, in order to prevent traders from dumping their mines, the Chinese authorities tightened their regulations on iron ore imports, and the details of financial expenditures and goods transactions had to be reviewed.
The countermeasure of iron ore traders is to press the order and press the goods. "The ore imported in the previous year will be pressed at the port for one year, and then given to the customer in the next year, and the price will be settled according to the next year." Almost became a gambler.
If the price of iron ore rises sharply in the second year, it will make a lot of money; if it falls, it will lose the family business. And when iron ore rose like a rainbow in the golden decade, traders can be said to be delighted.
However, no one can predict the prospect of the quasi-market. Traders have no expected industry adjustment. This flood-like price reduction has made the entire iron ore trading industry walk on thin ice.
In 2014, the Platts index fell to 83.75 on September 3, a record low in recent years; steel companies with low profits, strict procurement of raw materials, and tightened banking loans, the real industry winter has really come.
Second, the cold winter
After a decade of rapid growth, the commodity boom is no longer there. The bear market for iron ore has cost many traders their jobs and dragged down ports that take on shore. Many traders bluntly stated that the volatility of iron ore prices has sharply increased trade risks.
During the "cold winter" period, half of the traders who survived were very good, and even if they survived, they were just barely making ends meet, and they might close one day.
1. Iron ore prices plummeted
Iron ore traders are only one link in the steel industry chain. For these traders, the profit of 10 yuan and 8 yuan per ton of iron ore in 2014 can no longer be compared with the tens of dollars per ton before 2009.
By 2015, profits were meager, and survival was a top priority. It's enough to make a dollar a ton, and if you don't lose money, you will burn high incense.
The drop in profits was rooted in a sharp drop in iron ore prices. In January 2014, the Platts 62% iron ore index was still at US$130/ton, and it fell to the US$50/ton mark in early April this year, a drop of more than 60% within 15 months.
Medium-sized traders can barely make some orders through relationships, while small traders can only wait and see or withdraw.
2. The port grabs the "rice bowl"
In addition to the impact of the fundamental factor of falling iron ore prices, traders are also facing a squeeze from direct cooperation between ports and mines.
On July 2, 2015, the Ministry of Transport and the National Development and Reform Commission jointly issued a notice to allow 400,000-ton ships to enter. On July 4, the "Yuanzhuohai" ship with a load of 400,000 tons unloaded 351,000 tons of Brazilian iron ore at Qingdao Port.
The decline in ore prices is squeezing the living space of trading companies, and the direct connection between international mines and users will be a trend, and the status of port "supermarkets" will become more and more important.
3. Financing becomes difficult
The relationship between traders and banks is like cat and mouse, but it is impossible to tell who is a cat and who is a mouse. Banks today are busy collecting loans.
In the opinion of a banker, banks also have difficulties. In order to prevent bad debts, the most direct way is to take out loans. But for traders who rely on bank financing, once the loan is repaid, it is difficult to re-loan.
To give an example, a trader borrowed 700 million yuan, and the monthly interest is more than 6 million yuan. Now he can't even earn 600,000 yuan, and the interest is still not enough. How can he pay the cost? What about the bank like this?
Therefore, 2014-2016 was a difficult three years for iron ore traders. During this period, small and medium-sized traders collapsed in the cold winter. However, at the beginning of 2017, the price of iron ore returned to the $90 mark, giving the surviving trade It is a chance for traders to breathe. Although the current price is showing a downward trend, it still gives traders a lot of confidence!