Development and Reform Commission: Oversupply of iron ore

On March 25th, the National Development and Reform Commission released an analysis article clearly stating that China's crude steel production has entered the platform period, and other countries and regions have not yet formed considerable iron ore consumption capacity; in the next few years, iron ore production capacity will increase to 9 Billion tons, it is expected that from 2013 to 2015 will increase the output of iron ore by about 300 million tons. For this reason, the pattern of oversupply of iron ore has already taken shape.

The NDRC analysis article stated that as China responds to the international financial crisis policy, the steel industry shifts its development focus to improving the quality and efficiency of operations. China's crude steel output will increase or decrease steadily or slightly. According to forecast, China's crude steel production in 2013 was 746 million tons, an increase of 30 million tons compared with 2012, and it is expected to increase the demand for iron ore by 50 million tons.

However, the slowdown in the growth rate of the current advanced economies makes it difficult to stimulate the consumption of steel products. In emerging countries such as India, due to lack of infrastructure and small capacity base, the increase in output is limited. Accordingly, the development of the global steel industry has entered a relatively long period of time, and the demand for iron ore has been limited.

However, under the stimulation of high iron ore earnings, the expansion of iron ore production and new construction projects have been launched. The National Development and Reform Commission estimates that the output of domestically produced product mines will increase by about 20 million tons in 2013; according to the current plans for expansion of Brazil’s Vale, Australia’s Rio Tinto and BHP Billiton, the three major mines will increase their iron ore production capacity by approximately 100 million tons in 2013; Plans for expansion and new construction of emerging mines such as FMG, Carrara, and African mining are also moving forward. The peak period of production is 2014-2015.

The NDRC has forecasted that nearly 900 million tons of production capacity will be formed in the next few years. However, taking into account the various risks that will occur during the process of the plan, currently the industry is expected to increase the output of iron ore by about 300 million tons from 2013 to 2015. .

According to the NDRC's adjustment, from the perspective of trends, the oversupply of iron ore has become inevitable.

However, the National Development and Reform Commission also pointed out that although iron ore supply exceeds demand in general, due to the relative concentration of international mining companies, market supply can be adjusted by means of project delays, contracted production, etc., while steel enterprises, especially China's steel companies, are relatively In the process of dispersion, the “blast furnace-converter” process accounts for more than 90%, and the blast furnace production stoppage and the cost of the crucible furnace are relatively high. The demand for iron ore is relatively rigid. Therefore, the supply elasticity of iron ore is greater than the elasticity of demand, and both supply and demand sides have a certain short-term game space.