An oversupply of inventory consumption rose
Review of iron ore in recent years of a bull market, one industry cycle is relatively long, large-scale foreign mining construction period of 5-7 years, the country is relatively short, but at least 1-2 years, which means that short-term supply elasticity is relatively small, the price jumped supply able to come up; global economic growth, especially China's rapid economic development has greatly increased the global steel consumption; resource endowments lead to a high degree of monopoly of the iron ore market, Australia and Brazil accounted for the 2/3 of the global ore trade, prices have a strong voice.
Over time, the supply has been gradually released, while global consumption has declined. China is the world's largest pig iron production, pig iron production accounts for about 60 percent of global production, while the incremental output of pig iron accounted for about 96% of global incremental, so China is the largest consumer of iron ore and importing countries. Since 2003, iron ore prices have been rising, especially in 2007 after jump up high profits attract more and more capital into ore industry. Although the iron ore industry, long production cycle, counting from the ore prices rose rapidly in 2007 to 2012 has been more than five years, many new mines have been put into use, during the period 2012 -2014 will be more mines come on stream to use. At the same time, three miners outside the ore production increased rapidly growing number of imported ore from Mongolia and African countries. Country other than Australia, Brazil and India, foreign ore imports in 2007 accounted for 16 percent of all imports in 2012 was promoted to 26%, an increase of nearly 10 percent in five years. The monopoly of the global mineral industry is declining, and this put pressure on commodity prices.
Iron ore market consumption growth since the second half of 2011, the decline in supply growth rose gradually into a surplus. Global pig iron production increased growth rate of 2.49% in January-June 2012, down nearly 3.7 percent over 2011. At the same time the global iron ore production is on the rise, the 2011 Chinese iron ore annual output grew 23.5 percent in January-June 2012, an increase of 5.9%. In the same period, the yield of the three mines in 2012, in the second quarter was essentially flat with last year, but its overall production capacity of over 2011 11.7% increase. Ore market surplus, the Chinese port stocks soared to nearly one hundred million tons, the rapid price decline.
From micro data, inventory consumption ratio is a sensitive supply and demand indicators. The data show that the stock consumption ratio by about four weeks in 2007 has been increased to a high of around 9 weeks of October 2008, followed by warmer due to rapid economic indicators fell all the way around six weeks to April 2010, and with the consumption fell again in November 2011 hit a high of nine weeks. Ore market destocking, this index is maintained at around 7 weeks.
Historically, stock consumption ratio is about seven weeks is a medium to high value and its corresponding ore market is also more relaxed oversupply the market.
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