01 Introduction

As an important steelmaking raw material, the price level of iron ore is affected by fundamental factors such as supply and demand, while social activities such as production and consumption are often affected by seasonal factors. Iron ore inventories showed a clear seasonal trend from January to early March of previous years, while the performance was not obvious in other months, and steel mills have recently started replenishment, but the strength of replenishment remains to be seen.

02 Demand: Spring Festival effect and finished material consumption

Iron ore is mainly used for iron and steelmaking, and its demand performance is closely related to the demand for downstream raw materials. From the indicator of average daily molten iron production, there are mainly two periods of seasonal performance of molten iron production in the past five years, one is that it has a significant decline from February to March of each year, and then the shock has rebounded, and the other is usually at a high level from July to September, and then tends to decline. The decline in average daily molten iron production from February to March mainly corresponds to the decline in the production intensity of steel mills during the Spring Festival, and the blast furnace operating rate index can also support this view. Iron ore demand was at a high level from July to September, representing the good demand for finished materials and the seasonal construction season. Terminal construction is subject to the influence of rainy season and weather factors such as high temperature and low temperature, and also indirectly affects the consumption rhythm of steel and iron ore.

03 Inventory: the focus of recent market transactions

Inventory is a comprehensive performance of supply and demand, and it is also the focus of the iron ore market in the near future. From the perspective of steel mill inventory, the iron ore inventory indicators of the two types of steel mills showed a clear seasonal trend from January to early March in previous years, while the performance was not obvious in other months. From January to early March, the previous high and then low steel mill inventory corresponds to the winter storage replenishment behavior of steel mills from the end of the fourth quarter to the Spring Festival to meet the production demand of steel mills during the long holiday period when trade slows down, and the consumption of steel mills in a period of time after the holiday. Observing the winter storage situation in the past three years, the winter storage scale of steel mills in each year was 1300, 950 and 14 million tons, and the winter storage replenishment duration was about 1 to 2 months.

Recently, steel mills have started replenishment, but the strength of replenishment remains to be seen. Analysis of recent iron ore inventory data, steel mill inventories continued to rise slightly in the past three weeks, indicating that some steel mills have entered the replenishment stage, but the replenishment efforts are obviously not as good as in previous years, and the increase in the past three weeks is about 300,000-500,000 tons. 

At present, steel mill replenishment is subject to the reality of weak downstream demand and low profitability of steel mills, and the disruption of economic activity by the short-term epidemic is also a negative expectation. However, in terms of the absolute level of inventory, the current steel mill imported iron ore inventory is about 12 million tons less than 21 years, and the inventory consumption ratio is also at least 5 days away.