China iron and steel association: iron ore index trend deviation from fundamentals speculation risk to be vigilant
【2020-04-03】
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Since the opening of the market after the Spring Festival, domestic steel production has decreased and steel prices have dropped significantly, but the iron ore index price has risen by about 15% and remains at a high level with increasing frequency and range of fluctuations.
Luo tiejun, vice chairman of the China iron and steel association, said Friday that the current trend of the iron ore index is clearly deviating from the fundamentals of supply and demand and the spot market.
"Iron ore prices were up 20 per cent in the same period last year because of the disaster in Brazil, and they are now significantly higher than they were a year ago, driven more by money and sentiment." The price of the platts index rose 15% in the year to March 13 after the lunar New Year holiday, Mr. Luo said, while the price of the main contract for iron ore futures rose 12% and the spot price at Qingdao port rose 1%, while steel prices fell 9%. Index and futures correlation enhancement, follow each other, even with the Shanghai composite index trend.
'under the current pricing mechanism, the platts index has an important impact on the outcome,' he said. In the process of compiling spot price index, index institutions should base on the real transaction price of spot market and get rid of the influence of financial derivatives such as futures and swaps.
"We urge compiled institutions uphold the principle of objective and real release iron ore price index, also called on relevant national regulators to release, spot iron ore and iron ore index futures regulatory scrutiny, the possible violation and malicious speculation behavior strictly investigate, maintain healthy operation of the upstream and downstream of iron and steel." "Luo said
According to luo tiejun, from the point of view of supply, global iron ore exports will resume growth. Australian iron ore exports are expected to increase 3.7 per cent and Brazil 7.4 per cent in 2020. In addition, the resumption of supplies from mines in the country has been accelerated as domestic outbreaks and transport have improved.
From the demand, overseas iron ore demand is on the decline. In January, crude steel and pig iron output, excluding China, fell 3.4 percent and 4.4 percent, respectively, from a year earlier, according to the world steel association. Affected by the global spread of the disease, it is expected that the later decline in overseas steel production will be further extended.
Mr Luo said mines should "discover the price" rather than "create the price" through transactions on the third-party spot market. Under the condition of high concentration of upstream, any transaction controlled by upstream enterprises, including the so-called bidding, will produce unfair results.
He said cisa will further increase the monitoring of relevant information and data. At the same time, steel enterprises do not participate in the futures market speculation.
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