Vale's initiative to reduce prices of iron ore supply and demand inflection point near

The continued sluggishness in the domestic steel market has forced strong mines to take the initiative to lower their positions. Vale, one of the three major mining giants, recently stated that at the request of Chinese buyers, Vale intends to adjust prices for the fourth-quarter contract.

According to the current rules, the price of iron ore in the fourth quarter of this year should have been the average price of the Platts Index of iron ore for 6, 7 and 8 months, which is about 175 US dollars/ton, but now Vale is willing to use this price. Adjusted to refer to the spot price in the fourth quarter, and pay back more and less, the current spot price is about 160 US dollars.

It is understood that since October, the spot price of iron ore has fallen to a low level in one year, and the price of the agreement under the quarterly pricing mode has been delayed for several months. In addition to the difficult situation, many steel mills in China have proposed that they hope to postpone the shipment of the mine or re-negotiate the iron ore contract in the fourth quarter.

The rapid reaction of Vale caused some accidents in the industry and even called it a surprise. However, under the background that the global economy is shrouded in shadow, and the domestic crude steel output growth rate will continue to decline in the future, this may mean more that Vale is not optimistic about the outlook, or that the downward channel of iron ore prices has been opened. .

Xu Xiangchun, my steel network consulting director, said that whether analyzed from abroad or domestically, the future steel industry will reduce the demand for iron ore, and the turning point of iron ore supply and demand is approaching. Vale's active price cuts indicate that it has a new understanding of the relationship between iron ore supply and demand. It can be expected that Rio Tinto and BHP Billiton will also choose to cut prices to maintain market share.

It is reported that the current global iron ore prices have accelerated decline, steel companies are trying to reduce the cost of high-cost raw material inventory as early as possible, some steel mills have started to decline in raw materials inventory, steel stocks rise phenomenon, the overall release of steel production capacity Still at a high level.

According to the latest data provided by China Iron and Steel Association, the social steel inventories of the five major steel products in the 25 major cities in the country were 15.126 million tons, a decrease of 68 thousand tons from the previous period. This is the first time since May this year that domestic steel stocks are higher than the same period of last year. At the same time, the drop of 68 thousand tons is also much lower than the drop of 365,000 tons in the same period of last year.

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