In the past 10 years, with the continuous rise of iron ore prices, the cost of iron ore has accounted for about 40%-50% of the cost of steel production. The rise and fall of iron ore prices are directly related to the rise and fall of steel prices. Here, let us analyze why the price of iron ore is rising year by year? What will the price trend of iron ore be like in the future?
As we all know, China is an iron-poor country with low domestic iron ore reserves and low grades. This has resulted in a high degree of dependence of Chinese iron and steel enterprises on foreign iron ore, and this situation is difficult to change.
According to customs data, my country will import a total of 1.17 billion tons of iron ore in 2020, and its dependence on foreign countries will reach 82.3%. In 2021, my country will import 1.12 billion tons of iron ore, a year-on-year decrease of 3.9%. However, my country’s iron ore imports reached US$184.67 billion, a substantial increase of 49.3% year-on-year. The import volume hit the highest record since the import of iron ore in my country. The average price of imported iron ore was as high as 164.3 US dollars per ton, which also hit a record high.
According to statistics, in the 10 years from 2012 to 2021, my country imported 9.97 billion tons of iron ore, spending a total of 967.6 billion U.S. dollars in foreign exchange (equivalent to 6.2 trillion yuan). From the perspective of foreign dependence, since 2014, my country After the iron ore foreign dependence exceeded 80% for the first time, the iron ore foreign dependence remained high, and there was no year when it was lower than 80%, and it even exceeded 90% in 2016 and 2017.
my country’s iron and steel enterprises not only rely heavily on imported iron ore, but more seriously, the concentration of imports is also very high. my country’s iron ore imports come from 18 countries around the world, but 80% come from Australia and Brazil, of which Australia accounts for 67% and Brazil accounts for 13%.
Why has the price of iron ore remained high and rising year by year? We have to start with the world’s four iron ore giants.
The four iron ore giants are: Vale, Rio Tinto, BHP Billiton and FMG, accounting for 16.5% of the world’s proven iron ore reserves and 55% of the world’s iron ore production. Among them, Vale is the world’s largest iron ore company, located in Brazil, and the other three are the world’s second, third, and fourth largest iron ore companies, all located in Australia. They not only monopolize iron ore and supply, but also monopolize the pricing power of global iron ore.
As the largest importer of iron ore in the world, China has no pricing power. Another reason is that the iron and steel enterprises are too scattered, and the import procurement behavior of each enterprise is scattered. They each sign contracts with these four giants and speak their own words. Lost the right to speak in the international iron ore market.
From 348 yuan/ton in February 2016 to 1667 yuan/ton in May 2021, the increase has been nearly five times in just five years, and the bullishness is soaring. So, how to change the status quo of the iron ore market? How to obtain the pricing power of iron ore?
At present, the iron ore procurement pricing benchmark widely adopted in the international market is the Platts Index, which is different from futures prices. The Platts Index is not the price obtained by market participants from buying and selling transactions, but collects data based on telephone inquiries, emails, etc. The calculated evaluation value, data collection is not transparent, and it is easy to be manipulated.
Therefore, relevant parties in China are actively researching and launching the RMB spot price index of domestic port iron ore, based on 61% iron ore fines, using futures market transactions to promote the international influence of China’s index pricing. It is hoped that this index will be launched as soon as possible. Help enterprises reduce import costs and reduce the risk of large fluctuations in steel prices.
Another move is to find alternatives to Australian mines and Brazilian mines. The good news is that China’s two world-class giant iron mines are ready to be developed. In 2009, a huge iron ore mine was discovered in Dataigou, Benxi City, Liaoning Province. According to the latest data, the iron ore reserves are 13.61 billion tons, ranking first in the world. On June 24, 2009, as soon as the news came out, Benxi Iron and Steel’s steel plate pulled two daily limit boards.
In fact, so far, there is still controversy over whether the Dataigou iron ore should be mined. The iron ore in Dataigou is of high grade, pure ore, and the grade is between 24% and 61%. However, the iron ore is buried at a depth of less than 1000 meters and extends to nearly 2000 meters, all of which are rich iron deposits. Will such deep iron ore be mined out and lose its market competitiveness due to the high cost?
At that time, a mining expert from Central South University said in an interview with a reporter from China Securities Journal that the Dataigou Iron Mine had technical difficulties, such as ground stress, ground temperature, and rockburst, but these factors would not affect iron ore mining. At present, the mining depth of the Hongtoushan copper mine in Liaoning has reached 1,300 meters, and the Dongguashan copper mine in Anhui is 1,100 meters deep. The depth of a gold mine in South Africa reached 4,000 meters.
Benxi City pointed out in the government work report in 2021 that the Dataigou Iron Mine construction project will be determined among the key tasks in 2021, the transfer of exploration rights will be completed in 2021, and construction will start in 2022.
Xiaoling Town, Zhashui County, Shangluo City, only 100 kilometers away from Xi’an, has the largest siderite mine in China, with reserves of 502 million tons. At present, the 8 million tons/year siderite production system under construction will make the ore dressing capacity of Daxigou Mining Industry of Shaanxi Iron and Steel Group reach 10 million tons, and the production capacity of iron concentrate powder reach more than 3 million tons, becoming one of the large mines in my country. one.
Daxigou Iron Mine is a large siderite deposit with reserves of 302 million tons approved by the Reserve Committee of the former Ministry of Metallurgical Industry. Since there is no precedent for large-scale development and utilization of low-grade siderite in China, the project unit entrusted Changsha Research Institute of Mining and Metallurgy to conduct a semi-industrial test on Daxigou low-grade siderite in early 2004. The main selection indicators are close to magnetite and hematite, and reached the domestic and foreign advanced level of siderite separation.
According to the latest data, the iron ore grade of Daxigou Iron Mine in Shaanxi Province can reach 61.3% after scientific beneficiation, and the recovery rate is as high as 80%. It has become one of the highest-grade iron ore mines in China.
