Supply and demand difficult to meet the "inflection point" iron ore prices are still "crazy"

In August, when domestic iron and steel enterprises intensively announced the results of the "test", the international mining giant also announced high-profile performance in the first half of the year: BHP Billiton, Rio Tinto and Vale's three giants of mines realized a total profit of 34 billion U.S. dollars. *2176 billion yuan. According to statistics previously released by the China Iron and Steel Association, the profits of domestic key steel companies accounted for only one-fourth of the three major mines in the first half of the year. The profits of China’s most profitable steel company, Baosteel, are less than one-seventh that of BHP Billiton.

The main reason for the "distiance between the world and the world" in domestic and foreign steel industry profits is still "crazy" iron ore. In the first half of the year, the average import price of iron ore in China was as high as US$160.89 per ton, which, while refreshing its historical record, also allowed the international mining giants to earn “full profits”.

Industry experts pointed out that with the domestic steel market entering the "golden nine silver ten" traditional sales season, the possibility of iron ore prices continue to soar, the possibility of China's iron ore supply short-term pattern is difficult to usher in an "inflection point."

Mine giant - high altitude

BHP Billiton said in the semi-annual report that due to the increase in iron ore price, the company achieved a net profit of 23.65 billion U.S. dollars in the 2010-2011 fiscal year, a substantial increase of 85.9% year-on-year. Among them, the first half of this year completed a net profit of 13.124 billion US dollars.

In BHP Billiton's view, the company's net profit rose mainly due to the strong profitability of iron ore, which, iron ore business profit more than doubled over the same period last year; in the second quarter of this year, the company's iron ore production increased by 14% year-on-year.

The other two mining giants, Vale and Rio Tinto, realized net profits of 13.3 billion U.S. dollars and 7.6 billion U.S. dollars in the first half respectively, an increase of 150% and 30% year-on-year respectively. The three major mines collectively earned 34 billion U.S. dollars, or about 217.6 billion U.S. dollars.

In addition to the three major mining giants, Australia’s third-largest iron ore producer, Australia’s Metals Group (FMG), also issued a semi-annual report saying that it will benefit from the increase in iron ore prices during the 2010-2011 period ending June 30, 2011. During the fiscal year, the company achieved a net profit of 1.02 billion U.S. dollars, a year-on-year increase of 76%, and revenue increased from 3.2 billion U.S. dollars in the previous fiscal year to 5.4 billion U.S. dollars.

FMG executives frankly stated that the company’s large increase in profits was mainly driven by rising iron ore prices. The average price of iron ore increased from US$80/tonne in the previous fiscal year to US$149/tonne in the current fiscal year. Iron ore shipments are It has increased slightly from 38 million tons in the previous fiscal year to 40 million tons.

In fact, on the global steel industry chain, the situation of mining companies stabilizing profits and controlling steel mills has not changed. Taking 2010 as an example, the three major mines have realized a net profit of 48 billion U.S. dollars, which is 3.5 times that of the Chinese steel industry.

Under the lure of high iron ore profits, foreign mines have also accelerated the "China layout" process. According to news from the Ministry of Commerce website, FMG has used *** for trade settlement for the first time in recent days, becoming the first company in Australia to use *** as a trade settlement currency. FMG executives also said that in order to strengthen communication with China's iron ore buyers, the company has been studying the market conditions in Shanghai and Hong Kong, and consider the second listing to Shanghai and Hong Kong.

Domestic steel mills - several happy families

Contrasting with the scenery of the three major mines, Chinese iron and steel companies are very shabby. According to statistics from the China Iron and Steel Association, the first half of the domestic key steel companies realized a profit of 56.4 billion yuan, accounting for only a quarter of the total profits of the three major mines. Taking the most profitable Baosteel in China's steel industry as an example, in the first half of the year, Baosteel realized a total profit of RMB 111.33 billion, accounting for about 20% of China's key statistical iron and steel enterprises' total profits, and less than one-seventh of BHP Billiton's profits.

As of August 31, China's major steel companies have completed the disclosure of the semi-annual report one after another, in which "someone rejoices over Others."

According to the semi-annual report released by Hebei Iron and Steel Group, the net profit attributable to the shareholders of the listed company in the first half of the year was 803 million yuan, an increase of 11.64% year-on-year; the operating income was 68.594 billion yuan, a year-on-year increase of 16.88%. Hebei Iron and Steel pointed out that in the first half of the year, the domestic steel market was still struggling ahead in the downturn and low consolidation. The weakening of international demand and continued appreciation of steel prices led to a sharp drop in steel exports, while rising raw material prices for iron ore made the company The profit space continues to narrow.

Compared with Hebei Iron and Steel's "appropriate law," the most surprising is the Baoshan Iron and Steel and Anshan Iron and Steel, both net profit have shrunk dramatically, of which Anshan Iron and Steel's profits fell by 92%, in the first half only net profit of 220 million yuan; Baosteel's net profit for the first half of the year was 5.079 billion yuan, down 36.9% year-on-year.

Coincidentally, Anshan Iron and Steel and Baosteel also attributed the “large decline” in net profit to the increase in raw fuel prices.

Angang said that the increase in raw fuel prices is greater than the increase in steel prices. The gains from the increase in steel prices are far from making up for the increase in costs caused by the increase in raw fuel prices, which is the main reason for the sharp decline in net profit.

Baosteel believes that the gross profit rate of steel products in the first half of the year decreased by 7.3% due to the increase in raw fuel prices, which was constrained by the continuing downturn in demand in the downstream industry and the increase in gross profit loss from heavy plate products.

A phenomenon that merits attention is that, regardless of whether profits increase or decrease, many steel companies' production in the first half of the year has “shrink” in varying degrees. For example, Hebei Steel’s output of iron, steel, and steel all declined slightly, with production of iron and steel not reaching half of the annual target, while steel production just completed 50.59% of the annual target. Angang’s output of iron, steel and steel decreased by 3.68%, 5.18% and 4.87% respectively year-on-year, while steel sales also saw a slight decrease of 3%.

Iron ore - the culprit of erosion profits

With reference to the results of the “middle exam” of major domestic steel companies, it is not difficult to find that the quarterly iron ore pricing mechanism based on spot prices is the main reason for the erosion of steel mill profits. In the highly monopolized global iron ore market, iron ore has been the most stable and efficient source of profits for the international mining giants, while downstream steel companies can only play the role of “wage earners”.

Relevant statistics show that: In 2010, the key iron and steel enterprises under the China Iron and Steel Association accumulated profits of 89.715 billion yuan, an increase of 52% over the same period of last year, but due to the sharp rise in iron ore prices, the annual expenditures exceeded 30030 billion, equivalent to ** * 198 billion yuan, which is 2.21 times the annual profit of China's key steel companies.

In the first half of this year, China imported a total of 330 million tons of iron ore. As the average cif price of iron ore reached the historically highest level of US$160.89 per ton, domestic steel companies have spent more than US$16 billion. According to the average exchange rate of *** against the US dollar, the cost of the steel industry will increase by 104.11 billion yuan.

In the second half of the year, the trend of iron ore prices will largely determine the fate of steel companies throughout the year.

Although senior executives of mining giants such as BHP Billiton and other mining giants recently agreed that the impact of tightening monetary policy will slow the pace of growth in China’s iron ore demand and increase the instability of the iron ore market in the second half of the year, the industry in China still remains. Be cautious.

The relevant experts from the China Mining Association frankly stated that it is difficult for us to welcome the "inflection point" in the short-term supply pattern of iron ore. In the second quarter of this year, due to the fall in domestic steel prices, the expansion of iron ore import channels, and the increase in production, iron ore prices have declined due to temporary restraint in demand, but this price drop is only a short-term phenomenon rather than a long-term trend.

“Under the monopoly pattern of iron ore, as the demand of developing countries and emerging economies represented by China continues to grow, international mining giants can still control the supply and demand balance by controlling the release rate of production capacity and control iron ore prices. "An industry source pointed out.

However, the good news that merits attention is that domestic mines still maintain a steady growth momentum, and the process of diversification of imported iron ore in China is accelerating.

Relevant statistics show that from January to June this year, China produced 580 million tons of iron ore, an increase of 22% year-on-year, of which single-month output exceeded 100 million tons. In the first half of the year, the proportion of imported iron ore from Australia, Brazil and India in the total import volume has dropped from 81.7% in the same period of last year to 75.4%, down 6.3% year-on-year; as of June this year, China’s iron ore Import source countries have risen from 37 in the same period last year to 53.