Pu'er settlement observation point settlement observation nail production factory welcomes purchase

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　　Pu'er settlement observation point settlement observation nail production factory welcomes purchase

　　The demand for iron ore is concentrated in the blast furnace stage of steel production. The earliest expectation for steel mills to resume production of blast furnaces began in mid November 2021. At that time, the logic behind the market's expectation of resuming production was relatively clear: according to data released by the National Bureau of Statistics, crude steel production had shown a year-on-year decline from January to October 2021, which means that achieving the goal of no increase in crude steel production year-on-year for the whole year has become relatively easy. There is room for steel mills to resume production by the end of 2021. However, in reality, the expectation of steel mills resuming production has not been verified. According to relevant institutional data, from November 8th to 12th, 2021, the utilization rate of blast furnace capacity in China was 75.72%. During the six weeks from November 5th to December 25th, the utilization rates of blast furnace capacity in China were 75.35%, 75.23%, 74.80%, 74.12%, 74.28%, and 74.33%, respectively. From the perspective of the utilization rate of blast furnace production capacity, the actual situation of blast furnace production shows a stable and declining trend.

From December 27th to 31st, 2021, the utilization rate of blast furnace production capacity in China increased to 75.79%, which seems to be a signal that the resumption of blast furnace production has been verified. However, in comparison, the utilization rate of blast furnace capacity from December 27th to 31st, 2021 was almost the same as mid November 2021, which means it has just recovered to the level when the steel plant's blast furnace resumption of production was expected. At present, the market's expectation for steel mills to resume production has not changed, which is also logically supported. As reflected in the utilization rate of blast furnace capacity, after the vigorous reduction measures launched in the second half of 2021, the national steel production has been compressed to a lower level. If the current production level is maintained throughout 2022, the steel production in 2022 will inevitably show a significant year-on-year decline, and there will be a clear gap between steel supply and demand. However, when it comes to iron ore prices, since the previous increase in iron ore prices was based on the expectation of steel mills resuming production, and the current expectation of steel mills resuming production has not been verified in reality, iron ore prices should lose their important driving force. Even if steel mills resume production in the later stage, it will only realize the positive factors in the early stage and cannot be regarded as new positive factors. In addition, it should be emphasized that the policy background of carbon peak and carbon neutrality is still in place. In the medium to long term, the compression of blast furnace production will become a trend, and the logic of mid-term decline in iron ore demand has not changed, which is an important bearish factor for iron ore prices.

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