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Raw Materials Daily Issue 577 Friday 7th July 2017 Iron Ore • Metallurgical Coal • Coke • Scrap • Ferroalloys • Latest News • Analysis • Data Contents Mysteel Iron Ore Index 62% Fe (Australia Fines) CFR Industry & Market News 2 100 Chinese Raw Materials Prices 4 90 Key Indicators & Analysis 6 80 Maintenance & Restrictions 8 70 Iron Ore Shipments 9 60 Domestic Mine Operation 11 Inventories Overview 12 50 Port Congestion 13 40 Inventories of Australian Ore 14 30 Inventories of 20 Brazilian Ore 15 Inventories of 10 Indian Ore 16 0 Iron Ore For Trading 17 Stocks in Bonded Areas 18 Daily Offtakes 19 Renewed domestic iron ore consumption provides support to Total Iron Ore Inventories 20 local portside prices About Mysteel 21 Mysteel’s major iron ore portside prices edged up around RMB5/t today, as mills returned to the market after a period of sitting on the sidelines. We Editorial had heard some mills had been reluctant to purchase material earlier in the Vice President: week due to unclear direction in the market. More recently, however, some Zhang Yong mills have ramped up their output in response to robust margins and the +86-21-2609-3209 end of routine maintenance programmes. For example, Mysteel’s bespoke [email protected] survey of blast furnace capacity utilization across 163 steel mills shows that rates increased 0.74% week-on-week tp 85.34% on Friday 7th July 2017. Head of Market Intelligence: Atilla Widnell That said, Mysteel understands some traders were reluctant to sell cargoes. +65-6653-8226 As a result, some steel mills raised offer prices to conclude deals. At the [email protected] same time, we estimate relatively lower portside inventories supported the increase in portside prices. According to Mysteel’s survey of 45 major do- Editors: Victoria Zou mestic ports, inventories declined 1.84 Mt over the past week to 142.29 Mt [email protected] on Friday 7th July. As a result, Mysteel’s 62% Fe iron ore index for portside materials increased RMB7/t day-on-day to RMB478/t, FOT Qingdao (incl. Eleanor Wu tax). [email protected] Industry & Market News 2 Hei Longjiang province announces plans to the back of low inventory driven by mills’ production close four coal mines; eliminating 2.92Mt of restriction. capacity in 2017. Hei Longjiang province an- nounced plan to permanently close four coal mines Steel supply may move up steadily but the co- and eliminate 2.92Mt of capacity in 2017. Among relation between supply and demand will not be the four coal mines, the closure of the Xin Lu colliery changed drastically, said Wei Songhui, researcher of of He Gang Mining Company, and the Xin Qiang Minmetals & Jingyi Futures. Steel structure upgrad- colliery of Qi Taihe Mining Company, belonging to ing and capacity optimization is the irreversible trend Longmayi Mining Group, will eliminate 1.00Mt and under the background of supply-side reform, supply 1.4Mt annual capacity respectively. will be kept within a controllable range even though it may show a certain upward trend. In addition, it is Meanwhile, the two other mines of Yi Wuyi Coal estimated that in the second half year, steel demand Mining Co., Ltd in Hei He city will see the removal of will become stronger driven by the increased invest- 450,000 and 70,000 of annual coal capacity. Moreo- ment of infrastructures construction, which can help ver, the provincial government plans to resettle the GDP growth rate stay above 6%. 8,199 affected coal workers. 80% of Chinese enterprises fail to meet strict environmental standards. The chair- man of the supervisory board, Ji Xiaonan, from SASAC key large enterprises said at the China Green Development Forum on 6th July 2017 that approximately 80% of China’s enterprises have various problems meeting environmental regulations according to the supervision on the prevention and control of air pollution in Beijing, Tianjin and the sur- rounding areas. Moreover, Ji Xiaonan noted there was a huge challenge for China to deal with the relationship between enterprise development and environmental governance. The chairman stated that central enterprises will play an important role during the process of developing greener practices, which was also up to the industry to manage. Cut- ting overcapacity and adjusting layout structure are helpful to reduce waste of resources and promote green development. Newly-added electric furnaces not to disturb balance between supply and demand. Market participants argued that the balance between supply and demand will not be disturbed by properly re- leased capacity amid high profit in steel industry. As one of the raw materials for steel production, scrap followed the rising trend of steel prices recent- ly due to the increasing usage of electric furnaces after substandard steel elimination, and the bullish sentiment of steel traders, seen by Wei Yingsong, a senior analyst from Mysteel. A steel trader from Qingdao indicated that steel prices may continue to maintain at a high level on Friday 7th July 2017 Copyright © Mysteel.net, 2017. All Rights Reserved www.mysteel.ne Economic Highlights 3 Global Economics: Central Banks are be- numbers come at a time when the Chinese govern- coming more hawkish. The Fed has been for ment is trying to keep a strong economic growth some time the only hawk amongst Central Bankers. while embarking into a series of measures aiming at Markets have anticipated another 25bp interest rate de-leveraging the economy. It therefore gives more hike in 2017 with the possibility of two more in- room for the PBOC to push ahead with reforms. creases in 2018. As the world economy is continuing However, we believe that as the 19th National Con- its synchronised upswing, the Fed hawkish rhetoric gress of the Communist Party of China nears, the has been joined by the European Central Bank, the monetary authorities will become more prudent, to Bank of Canada and after a surprising reversal, by ensure that there will be sufficient financial stability Bank of England, triggering the question whether we at that time. could see a synchronised tightening. Central Bank- ers are certainly making their rhetoric louder but we The Chinese Yuan has also posted its strongest believe that they will be very prudent in walking the quarterly gain in nine years, rising 1.8% vs the US walk with more tolerance for inflation -which has yet dollar over the past three months. All this points to materialize- and not put the economy at risk. towards a stronger than expected economy in the In the US, Fed officials have been discussing over second part of the year with at worst a mild slow- how the central bank should react to the US econ- down driven by moderating property prices. It is omy’s seemingly conflicting signals from unemploy- difficult to not mention the 20th anniversary of Hong ment and inflation. Kong handover to China, which took place on July 1st 1997. In its speech Chinese President Xi Jinping Joblessness dropped to 4.3% in May, a 16-year low. said that challenges to China’s rule would not be Ms Yellen and some of her colleagues have called tolerated and that the city’s leaders must find new for continued, if slow, tightening because they ex- ways to profit from Chinese economic clout, adding pect labour market gains will eventually trigger high- that they must build political consensus, devise new er wages and overall prices. Last week however, Ms economic drivers and address soaring home prices. Yellen nodded to concerns among some economists Hong Kong has Asia’s largest wealth disparity with that inflation expectations might be declining. ‘We housing prices having increased by nearly 400% don’t get a consistent story,’ she said. In a com- over the past thirteen years while the median wages prehensive speech hold in Sintra, Portugal, ECB’s trailed with a 75% rise. In terms of economic weight, President Draghi said that ‘deflationary forces’ have Hong Kong accounts now for only 3% of total been replaced by ‘reflationary forces’ summarizing China’s economy vs nearly 20% two decades ago, the optimism in the euro-area. Mr Draghi appeared reducing China’s tolerance for any political dissent. also convinced that the Phillips Curve will steepen During Mr Xi’s visit, the Hong Kong stock exchange at some stage but called for patience. He mentioned announced that foreign investors would, from Mon- that external shocks -mostly driven by commodities-, day July 3rd, gain access to China’s US$10tn debt wages upward resistance and a ‘labour market more market through a local bond connect. Mr Xi also contestable’ are causing delays in the transmission oversaw the signing of an agreement to develop from demand growth to inflation. Mr Draghi also said closer economic links between Hong Kong, Macau that patience was still necessary before removing and nine cities in the Guangdong province. the accommodative monetary policy. Nevertheless, Germany’s 10-year bond yield surged from 0.245% to 0.45% also helped by an increase in the German June inflation to 1.5% YoY from 1.4% YoY in May. China economy: stronger than expected. Weekly Economic Highlights provided by: China’s manufacturing PMI increased in June to Erik Sardain and Gilberto Cardoso 51.7 vs 51.2 in May, beating a consensus forecast Managing Partners of 51, an indication that China manufacturing is Victorem Capital taking full advantage of a stronger global economic www.victoremcapital.net demand. Non-manufacturing PMI also increased The opinions, findings, and conclusions or to 54.9 in June vs 54.5 in May, indicating a buoy- recommendations expressed in this analysis are ant service and construction activity.

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