China Mining News: The establishment of a long-term, stable, efficient and diversified resource security system should be accelerated

The government work report of this year's national two sessions proposed to adhere to the general keynote of seeking progress in a stable manner, promote the overall improvement of economic operation, and achieve effective improvement of quality and reasonable growth of quantity.

At present, China's metal mineral consumption accounts for more than 40% of the total global consumption, of which, iron ore consumption accounts for 62%. The huge consumption makes China's metal minerals import quantity is increasing day by day, the degree of foreign dependence is rising, the import price is climbing. How to effectively maintain the balance of demand and supply over a period of time is still the focus of great concern in the industry. Recently, Fan Tiejun, Deputy Secretary General of China Iron and Steel Industry Association and President of Metallurgical Industry Planning and Research Institute, gave an in-depth interpretation of the current supply and demand situation and development trend of iron ore industry and made relevant suggestions.

I. Global iron ore supply will exceed demand for a period of time

Fan Tiejun said in his analysis of the current supply and demand situation and development trend of the global iron ore industry, global steel consumption in 2022 will be 1.795 billion tons, down 2% year-on-year. Based on the analysis of global and regional economic development and steel demand, it is predicted that in the second half of the 14th Five-Year Plan, major steel consuming regions will achieve economic growth, leading to a slight growth trend in global steel consumption. In this context, from the demand side, the global iron ore consumption in 2022 is estimated at 2.258 billion tons, down 3% year-on-year, according to pig iron production. It is expected that the future of China's pig iron production will continue in the reduction adjustment area for a longer period of time, iron ore demand and pig iron production will remain synchronized; other countries around the world new iron ore demand basically just to make up for China's share of decline, the global demand for iron ore overall show a stable trend, the recent decline is still possible. From the supply side, global iron ore production will be about 2.4 billion tons in 2022. In recent years, the four major mines still have some iron ore capacity released to increase capacity or to supplement the capacity to be closed, and along with the production of some iron ore mines in Africa, the global iron ore supply shows an overall growth trend. Looking to the medium to long term, as global iron ore demand decreases and high cost and low quality mines gradually exit, future iron ore supply will gradually decrease. Overall, the global iron ore supply exceeds demand will exist for a long time in a certain period of time.

Second, the demand for high-grade iron ore in China will gradually increase

The central economic work conference in December 2022 clearly put forward, "strengthen the important energy, mineral resources domestic exploration and development and increase storage on production, accelerate the planning and construction of a new energy system, and enhance the national strategic material reserve security capacity. Recently, a number of national policies have pointed out the direction for a new round of mineral exploration.

From the domestic iron ore market, in 2022, the lack of demand-side led to a 3% year-on-year decline in China's steel consumption. But China's long-term economic fundamentals have not changed, the relevant experts expect that the "14th Five-Year" period, China's steel demand will fluctuate downward trend, but still remain at a high level. In this regard, Fan Tiejun said, under the guidance of industrial policy, China's steel industry to production capacity double control as the basis, to ultra-low emission transformation as a grip, to energy consumption double control as the driver, to intelligent manufacturing initiatives, low-carbon transformation as the guide, and unswervingly take the road of green low-carbon quality development, to promote the transformation of development and structural adjustment.

Process structure adjustment, "double carbon" target, with China's steel industry to the peak area in the middle and late development, scrap resources, electricity and other support conditions gradually improved, to a certain extent will accelerate the steel process structure adjustment, accelerate the proportion of electric furnace steel to enhance, but the adjustment cycle may be longer. Material structure adjustment, environmental protection policy, industrial policy, blast furnace large-scale and other factors, will help push China's blast furnace furnace structure to "pellet increase, sintering down" direction optimization adjustment; with low-carbon smelting process and technological innovation, blast furnace process with traditional iron ore raw material demand will gradually reduce, the demand for high-grade ore resources will also gradually Increase.

For the current situation and trend of China's iron ore demand, Fan Tiejun has analyzed and predicted from 4 dimensions. In terms of domestic ore, in recent years, China's iron ore production has been falling before rising, and the national iron ore production in 2022 will be 968 million tons of raw ore, or about 300 million tons of finished ore. The future of domestic mineral production will be to stabilize growth and adjust the structure, maintaining a certain level of supply capacity and resource security. Imported ore, in recent years, China's iron ore imports are fluctuating upward trend, reaching 1.107 billion tons in 2022; China's external dependence on iron ore is rising and then falling trend, accounting for about 79.8% of the total consumption of iron ore in 2022, although imports have declined, but still at a high level. As China's scrap steel utilization rises, the overall demand for iron ore is downward, coupled with the successful implementation of the "Keystone Plan" for domestic ore production, the amount of imported ore will drop significantly. In terms of equity mining, China's overseas equity mining capacity will be about 62.9 million tons in 2022. Considering the current progress of major overseas iron ore projects, with the implementation of the "Keystone Plan", the amount of China's overseas equity ore is expected to further increase during the "Tenth Five-Year Plan". In terms of iron ore prices, iron ore prices will rise and then fall in 2022, with huge oscillations. Recent iron ore prices by the "strong expectations" and the market speculation has climbed sharply, but the current end demand is expected to continue to be in doubt, the high price support is not enough. In the long run, "strong expectations" will eventually return to rational reality, iron ore prices will fall back to a reasonable range.

Third, the overall supply of steel scrap resources is on the rise

Steel scrap as recycled steel raw materials, is an important source of iron, is a green raw material for the iron and steel industry, iron ore has a certain alternative role. The use of scrap steel and the use of iron ore as a source of iron, the structure of iron resources, energy structure and process structure, on resources, energy consumption and all types of emissions, including carbon dioxide emissions will have a significant impact.

Relevant data show that by 2025, China's steel accumulation will reach 12 billion tons and the annual output of scrap steel resources will reach 270-300 million tons; by 2030, China's steel accumulation will reach 13.2 billion tons and the annual output of scrap steel resources will reach 320-350 million tons.

In March this year, Vice Minister of Industry and Information Technology Xin Guobin said when talking about the industrial carbon peak and green transformation, this year will implement the comprehensive utilization of resources to improve quality and efficiency action, and strive to achieve the utilization of scrap steel to 265 million tons in 2023.

China Scrap Iron and Steel Application Association analysis that, with the recent start of the infrastructure market, steel into the end demand gradually stronger, steel enterprises production enthusiasm significantly increased, profitability has also improved, to a certain extent, to support the scrap steel prices rise. But the current thin profits of steel enterprises, steel prices continue to move upward momentum is insufficient, steel enterprises scrap arrivals at a higher level, and merchants have intentions to step up shipments, or will inhibit the scrap prices continue to rise. Scrap prices are expected to rise and fall in the short term, steel enterprises will be based on inventory and other circumstances to adjust the purchase price slightly.

For the development trend of the scrap market, Fan Tiejun said that through the study of the relationship between the amount of scrap resources generated and steel accumulation in China, and combined with the actual supply and demand of domestic scrap in recent years, it is estimated that as China's social steel accumulation will continue to grow rapidly, the output of scrap resources will further increase, coupled with the liberalization of renewable steel raw material import policy, it is expected that the overall supply of scrap resources in China is on the rise.

At the same time, he said that in recent years, China's scrap steel processing enterprises have surged, the more intense competition. At present, domestic scrap resources are limited, not enough to support the rapid development of electric furnace steel, and steel enterprises to enhance the level of application of scrap steel. To further strengthen China's scrap steel resource security capacity, it is recommended to accelerate the creation of scrap steel resources recycling industry system, improve the construction of the management system of the scrap steel industry, and guide the efficient use of scrap steel resources in the steel industry.

Fourth, accelerate the establishment of long-term stable and efficient diversified resource security system

Iron ore as a national strategic mineral resources, to maintain the steel industry chain supply chain security has a ballast role.

Fan Tiejun said that the essential problem of China's iron ore resource security is structural imbalance. The main manifestation is that the total amount of domestic iron ore resources is large, but mainly poor ore; imports are large, accounting for a high proportion and concentrated sources; the slow progress of investment in iron ore resources abroad, the overall effectiveness is not obvious; strong financial attributes of iron ore, the lack of pricing discourse; supply and demand sides of the market position is not equal. At present, China's iron ore security capacity is still seriously inadequate.

The high degree of foreign dependence on iron ore not only seriously affects the supply chain security of the industrial chain, national strategic security, but also makes the steel industry a large number of profits captured by foreign mining enterprises.

He suggested that China's steel industry should accelerate the establishment of long-term, stable, efficient and diversified resource security system. To make full and efficient use of domestic and foreign resources, while stabilizing the domestic cycle, to promote the formation of international circulation, the formation of domestic and international dual cycle of raw materials security pattern. It should also strive to build a multi-dimensional and diversified resource security channel through the joint use of domestic and foreign mines, the formation of a strategic supply chain, ensuring a certain proportion of equity mines, strengthening the construction of overseas multi-resource bases, establishing a resource reserve system, strengthening the risk prevention of iron ore transportation channels, using and improving the raw material financial trade system and related derivatives, and other paths.

Note: This article is from China Iron and Steel Industry Association