High-cost ore stocks keep steel companies in the throat

Although the soaring imported ore prices have been plummeting since October this year, this does not quickly remove the cost of the steel companies. Yesterday, industry analysts pointed out that due to the large inventories of high-priced ore, it is difficult for steel companies to digest in the short term, and the profitability in the fourth quarter is unlikely to improve significantly.

According to the analysis of United Metals, the decline in ore prices is not directly beneficial to steel companies. Because steel production has the characteristics of large scale and strong continuity and requires large stocks of raw materials, the stocks of most steel companies are now hoarded at high ore prices.

According to the statistics of iron ore inventories of 55 small and medium sized steel mills recently carried out by relevant agencies, the inventory cost is 1,445-1,455 yuan per ton, which is much higher than the current iron ore price of around 1,000 yuan. It takes a long time for steel companies to use these stocks. High-priced minerals are digested.

Zhou Guoquan, vice president of Changzhou Zhongtian Iron and Steel Group, said: “The pressure we are facing is mainly the pressure of destocking, and the company will minimize procurement to digest the existing inventory.” It is also worth noting that, although the price of imported iron ore has dropped, the shipping costs for transporting iron ore have increased significantly.

In response, the industry generally believes that, generally speaking, iron ore buyers need to pay the freight rate and ore price, and now the price of ore has dropped. In the capacity sector, international mining giants may jointly raise price by acquiring shipowners to obtain a portion of profit. It can be seen that the decline in ore prices in the short term will not result in a significant improvement in the profitability of steel enterprises.

However, in the long run, this round of iron ore price cuts will definitely be a good thing for domestic steel mills. According to customs statistics, from January to September, the average landed price of imported iron ore in China was 165.74 U.S. dollars per ton, which was a year-on-year increase of 43.29 U.S. dollars per ton, an increase of 35.35%. Due to the increase in the price of imported iron ore, it has spent **219.94 billion U.S. dollars. The price of iron ore has risen sharply. It has been unable to absorb its substantial increase in costs by reducing costs and increasing efficiency. If the ore prices continue to operate at a high level, the loss-making enterprises in the steel industry will continue to increase.

At present, seeing the price of ore falling, an industry expert points out that steel mills can use this opportunity to return iron ore prices to a reasonable price and strive for greater pricing power. Moreover, at most until the end of this year, the high-priced ore that the steel mill purchases before may be basically digested, so that the high cost and low profit of steel enterprises will be alleviated.