Iron ore industry Research Report: Lonely at the top

By country, the top three iron ore imports are China, Japan and South Korea. According to Mysteel data statistics, in 2019, the iron ore imports of the three countries were 1.07 billion tons, 120 million tons and 0.8 million tons, and China's iron ore imports in a year, as a large iron ore demand country, were almost 9 times that of Japan. As can be seen from the following table, the import sources of the three countries are mainly Australia and Brazil, among which the annual export volume of Australia and Brazil to China reached 670 million tons and 230 million tons respectively.

2. Demand: It is expected that the global iron ore demand growth rate in 21 and 22 years will be 4.2% and 0.8%

Iron ore demand comes from the long process (blast furnace + converter) blast furnace ironmaking process and the short process (electric furnace) direct reduced iron link, so we analyzed the global iron ore demand in 2021 and 2022 from the three perspectives of overseas, domestic long process blast furnace ironmaking and global direct reduced iron.

In terms of the proportion of global crude steel production in 2019, the converter accounted for 71.6%, of which, by country, China's crude steel production accounted for 66.6% of the global crude steel of the converter. According to the statistics of the International Iron and Steel Association, in the global production of sub-process crude steel in 2019, converter crude steel accounted for 71.6% and electric furnace crude steel accounted for 27.9%. By country, China's crude steel production accounted for 66.6%, followed by Japan, South Korea and India, accounting for 5.6%, 3.6% and 3.6%, respectively.

In 2019, China's crude steel output was 1.0 billion tons, of which the crude steel of converter accounted for 89.6%, while the crude steel output of Iran and Italy was only 0.3 million tons and 20 million tons, respectively, but the crude steel of electric furnace accounted for 90.1% and 81.9%, respectively.

2.1 Overseas long process demand: it is expected that the production of pig iron in 21 and 22 years will be 490 and 500 million tons

Overseas long process capacity in 2020 under construction 16.7 million tons, planned construction capacity of 24.3 million tons. According to the OECD's Latest Developments in Steelmaking Capacity report, published in June 2020, We count the long and short process capacity Underway in 2020 and planned for 2021-2022 in overseas countries or regions. Overseas production capacity under construction in 2020 is 16.7 million tons of long process capacity and 23.184 million tons of short process capacity. From 2021 to 2022, it is planned to build 24.3 million tons of long process capacity and 27.376 million tons of short process capacity.

the Organization for Economic Cooperation and Development (OECD) has published Capacity Developments in the World Steel Industry annually since 2015, and we assume that if a long-process project is shown to be under construction in 2020:

(1) If it is under construction in 2019, it will be put into production in 2021 at the earliest;

(2) If it is in the planned state in 2019, production will begin in 2022 at the earliest.

Combined with the project progress information, we are expected to add 17.72 million tons of overseas long process capacity in 2021-2022, 2.23 million tons.

Japan is a typical long-process steelmaking country, we take the production situation of the Japanese steel industry as the representative of overseas long-process steel enterprises to put forward the following hypothesis:

(1) Considering the rapid increase in capacity utilization after the gradual elimination of the impact of the novel coronavirus epidemic, we assume that the average capacity utilization level of crude steel in existing overseas long-process steel enterprises from March to December 2021 will return to the same period in 2010-2019 except 2020. Specifically, we assume a recovery to 2011 levels in the cautious case, 2014 levels in the optimistic case, and the 2010-2019 average in the neutral case.

(2) Considering factors such as the time point of production and capacity climb, it is assumed that the capacity utilization rate of overseas new growth process capacity in 2021 is about 50%.

Assuming that the capacity utilization rate of overseas long-process pig iron from March to December 2021 is 95.1, 100.6, 105.1 (based on 2010 =100), we predict that the production of long-process pig iron may be 460-500 million tons. According to the statistics of the International Iron and Steel Association, the production of overseas long process pig iron in January-February 2021 is 74 million tons, We assume that the average production of long-process pig iron from March to December 2021 = the average production of long-process pig iron from January to February × (the average utilization rate of crude steel capacity in Japan from March to December/the average utilization rate of crude steel capacity in Japan from January to February). Therefore, under the three assumptions of caution, neutrality and music outlook, it is expected that the original production capacity of overseas from January to December 2021 will be 4.55 million, 477 million and 495 million tons, respectively. At the same time, the overseas new production capacity in 2021 is expected to contribute 0.09 million tons of production, and the global overseas long process pig iron production in 2021 will be 464, 486 and 504 million tons, respectively, an increase of 12.8%, 18.2% and 22.5%.