Rough steel market: Imports of iron ore continue to be high

According to customs data, in December 2011, China imported 1.19 million tons of steel, which was a year-on-year decrease of 15.6%, a decrease of 20,000 tons compared with the previous period, and steel exports of 3.72 million tons, a year-on-year increase of 31% and a decrease of 490,000 tons compared to the previous period. In 2011, China accumulatively imported steel 1558. Ten thousand tons, a year-on-year decrease of 5.2%; exports of steel 48.88 million tons, an increase of 15.1%, net exports of 33.30 million tons of steel, an increase of 28%.

In December 2011, China imported 64.09 million tons of iron ore, a decrease of 110,000 tons compared to the previous period; in 2011, China imported 686 million tons of iron ore, an increase of 67.62 million tons, an increase of 10.9%.

The lack of demand in the international steel market has further affected China's steel exports. In December 2011, China’s steel export volume fell to 3.72 million tons, a decrease of 490,000 tons compared to the previous month, and it was the lowest monthly steel exports since March 2011.

From the end of November last year, US steel mills took the lead in raising the ex-factory price. The European and Asian steel market prices also stabilized in December and saw a slight rebound. The international steel market situation improved slightly. The environment for steel exports from China has been somewhat improved. With the improvement, the export prices of steel mills rose steadily. The export quotation for SS400B 4.0mm or more hot-rolled coils from a certain northern steel plant in January 2012 was quoted at US$610/tonne (FOB) and exported to Vietnam, South Korea, and the Philippines. It is reported that the orders received by the steel mills are good, and orders have already been placed in March. Plate export quotation also rose slightly by 5-10 US dollars / ton, China's large steel plant boron-containing SS400 plate trading price of about 620-632 US dollars / ton (FOB).

However, the market price increase was mainly driven by the increase in scrap prices and low inventory. At present, the downstream has yet to start replenishing inventories. The market demand is still sluggish. The market generally expects the downstream centralized replenishment inventory to wait until after February. Moreover, from historical data, China's steel exports in the first quarter of each year are basically at annual lows. Therefore, it is expected that although there is little room for China's steel exports to continue to decline in the first quarter, it is unlikely to see significant recovery.

The average price of imported iron ore fell sharply and imports continued to remain high

In December 2011, although China's iron ore import volume fell slightly from the previous month, but from a full-year perspective, the import volume of 64.09 million tons was second only to January and November 2011 and was the third highest level in the year.

The price advantage became the main reason for the sharp increase in China's iron ore imports in November and December last year. According to customs data, the average price of imported iron ore in China in November was US$162.1/ton, which was US$13.4/ton lower than that in October, and the average import price in December further fell to US$141.2/ton, which was a decrease of US$20.9/ton from November. Compared with October, it dropped by US$34.3/ton, becoming the lowest monthly average import price since September 2010.

With the sharp fall in prices, the price advantage of imported iron ore is apparent. The average import price of iron ore is simply converted into the domestic market price. The price of iron ore imported from November to December last year was about 1190-104 yuan/ton. At that time, the prices of 66% grade iron concentrates in Hebei Province fluctuated between RMB 1250-1280/ton, and the prices of imported iron ore, especially those imported in December, were significantly lower than the domestic iron ore market prices.

Therefore, although domestic steel mills had to continue to reduce production in the context of low domestic steel market prices in November and December, low-priced imported iron ore created positive conditions for domestic steel mills to reduce cost pressures. The massive import of iron ore led to a sharp increase in iron ore imports in November and December last year.