In the long run, China's demand for iron ore will

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CISA: in the long run, China's demand for iron ore will show a downward trend

Hello, everyone. I'm glad to be invited to participate in the Singapore iron ore forum again. Iron ore supply is most directly related to steel production. Therefore, I will focus on two issues: steel production and iron ore trade

I. about steel production

in 2017, China's crude steel output was 832 million tons, an increase of 3% year-on-year; 75.43 million tons of steel were exported, a year-on-year decrease of 30.5%. China's crude steel output growth led to the increase in the number of imported iron ore. in 2017, China imported 1.074 billion tons of iron ore, an increase of 4.9% year-on-year

in the first quarter of 2018, the overall operation of China's iron and steel industry was stable, with crude steel output of 212 million tons, an increase of 5% year-on-year; 15.15 million tons of steel were exported, a year-on-year decrease of 26.4%

China's iron and steel industry experienced the coldest winter of this century in 2015, and the whole industry suffered serious losses that year. In 2016, we quickly reversed the difficult situation and fought a turnaround for two consecutive years. Where is the trick? It is because we took the lead in implementing the decision of the Central Committee and carried out the supply side structural reform with the breakthrough of resolving excess capacity

China's iron and steel industry is unique in the world in terms of the degree of capacity reduction, the amount of capacity reduction and the cost of capacity reduction. From the central government to local governments at all levels, from industries to enterprises, they have made a strong determination to resolve excess capacity, carried out careful and strong organization and implementation, removed 120 million tons of production capacity in two years, completely eliminated the "ground bar steel for the establishment of a national brand technology platform", and removed 30million tons of production capacity this year. Five years The target of 500 million tons will be completed within three years. China's iron and steel industry has achieved remarkable results in reducing production capacity, resolving the contradiction of serious overcapacity, resolutely eliminating backwardness, achieving the survival of the fittest, optimizing the production capacity structure, and laying the foundation for industrial upgrading. In the past two years, enterprise efficiency has rebounded, and the operation of the industry has entered a stable and good state. At the same time, not only the healthy development of China's iron and steel industry, but also made important contributions to the world's iron and steel recovery

we have also paid a huge price for removing capacity. Nearly 300000 employees have been resettled. The direct asset loss of the removed capacity is estimated to be hundreds of billions of yuan, and the debt of the removed capacity has yet to be digested. All people with conscience should agree that China has made such a great determination, made such a great effort and paid such a great price to produce capacity

it is puzzling that some people blindly accuse China. They blame China for overcapacity. Fundamentally speaking, the root cause of global overcapacity is the global economic downturn caused by the global financial crisis, insufficient demand, which highlights the problem of excess supply. It is unfair to attribute it entirely to China, and some even attribute their failure to China, Such accusations are not conducive to the solution of the problem. Whoever wants to talk about capacity, please talk about how much capacity you want to go first. If you only ask China to go, but you don't go, or even increase it, how can you talk about solving the problem of global overcapacity

China's steel production has always been to meet domestic demand, not for export. China's annual output of 800million tons of steel is because China consumes more than 700million tons of steel every year. No country has such a big appetite, and no one has the ability to fill this appetite. If China does not produce so much steel, it will not be able to build China by importing steel. What should China do? The Chinese themselves know that there is no need for others to give directions. China has determined the goal and path of high-quality development and will unswervingly follow its own path. The Chinese are not afraid of and are capable of meeting various challenges

we have made serious arrangements for the operation of steel in 2018. We should go both ways in terms of capacity reduction and output control, strictly prevent the resurgence of "ground steel" and prohibit new production capacity, resolutely fight the battle of capacity reduction and defense, actively stabilize the market, maintain the basic balance between steel output and demand, create a good market environment, avoid market ups and downs, and accelerate the pace of structural adjustment and scientific and technological innovation. In 2018, China's macro-economy operated well, with a GDP growth of 6.8% in the first quarter, and the demand for steel was stable. China's macro-economy provided space for high-quality development of the iron and steel industry. We are solidly promoting structural adjustment, transformation and upgrading, and we have targeted the large and strong development goal of China's iron and steel industry

II. About iron ore trade

China is the world's largest steel producer and the largest iron ore consumer. China's imported iron ore seaborne trade accounts for more than 70% of the world's total. Please enter the experiment number, which is the main battlefield of iron ore trade and shows the importance of normal iron ore trade

China's demand for iron ore depends on China's steel production, which has entered the peak platform area. In the future, it will fluctuate slightly in the peak platform area, but it will not fluctuate greatly, which determines that the demand for iron ore is relatively stable, which is also a reassurance for iron ore trade

in the long run, China's demand for iron ore will show a downward trend, but it is a slow and gradual process. China has nearly 10 billion tons of steel reserves, and nearly 200 million tons of scrap are produced every year. These two figures will increase unabated in the future. The increase of scrap utilization will inevitably lead to the reduction of iron ore consumption, but it will not be coaxed into the electric furnace. On the one hand, the digestion of scrap in long process production is limited by the steel quality, and the steel quality cannot be affected by the use of more scrap. On the other hand, it is limited by the scrap price. If the scrap price is too high, the economic benefits are not cost-effective, and it will not be used more. At present, there are many long-term processes in China's iron and steel production process, and the iron steel ratio is high. Process reengineering is not only a trend, but also a step-by-step process. Therefore, it is necessary to have an objective analysis of the amount of iron ore consumed in China and its trend over time, and have a rational expectation. Any speculation is useless, and both supply and demand sides should deal with this problem rationally

iron ore trade has experienced many years of ups and downs. The price of iron ore once rose to more than $180. This price deviates seriously from the value. The situation of one side making huge profits and the other side losing money is impossible to continue. It should not happen again in the future. In the past two to three years, it is returning to rationality. The tortuous historical process tells us the basic laws and lessons of the market. There are three profound points: first, we should strive for the basic balance between supply and demand; Second, we should strive for the rationality of price and the unity of price and value. The deviation of price from value will return sooner or later; Third, the distribution of profits in the industrial chain should strive to be reasonable and fair. Unreasonable and unfair will easily break the industrial chain. Our industrial chain is basically concentrated in mines, steel mills and traders. To live in harmony, these three parties should be relatively reasonable in profit distribution, and each should have its own income. It is impossible for one party to give priority to the other and suffer losses. The buyer and the seller should jointly negotiate trade rules and work together to create a good market environment and a healthy market order in the iron ore market

China Iron and Steel Industry Association attaches great importance to the healthy development of the iron ore market environment. Since last year, we have successively communicated and discussed with the leaders of the four major mines, hoping to reach a consensus on long-term cooperation and mutual benefit and win-win results in terms of business philosophy. No one can leave the mine and steel plant without their most direct partnership. Whoever leaves the other side means loneliness and fear. Mutually beneficial cooperation should become a common desire. We should constantly innovate in pricing mechanism and cooperation mechanism, and both sides should negotiate. 1 If the main motor source of the experimental machine is not bright, both parties are willing to monopolize it, and neither party can break the rules and agreements. The pricing mechanism should be further improved. For example, now everyone uses index pricing, but now there are many indexes in the world. These indexes are important references. Relying on single index pricing inevitably has limitations, and adopting mixed index pricing may be more fair and open. In terms of these consensus, we have reached an agreement with the four major mines, and I hope you will follow it. Improving the pricing mechanism is not to tilt unilaterally, but to benefit mines, steel mills and traders

now, there are many new things promoting the healthy development of iron ore market. There are contract trade, spot trade and futures trade. The iron ore futures trade of China Dalian Commodity Exchange has implemented internationalization and RMB settlement. There are many more index references for iron ore trade than in the past. There are many ore price indexes, as well as steel price indexes, spot indexes and futures indexes. Many references are also new things, which are more conducive to the healthy development of the iron ore market. Such a variety of trade methods and multiple references make the iron ore market more real and less market risk. We should make good use of them

distinguished guests and friends, it is our common desire and common goal to create a healthy iron ore market environment and good market order. Mutual benefit and win-win results should become our common pursuit. Establishing an open, fair and transparent iron ore pricing mechanism is the basis for mutual benefit and win-win results among the three parties. Long term cooperation and various forms of cooperation are worth exploring and strengthening. Let's work together to further strengthen communication and cooperation, strive to build a community of shared future, and actively realize a better future for everyone

I wish you all good health and happiness, and I wish the conference a complete success

thank you

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