China's port iron ore inventory is 127 million tons, at a high levelAt present, the utilization rate and capacity of blast furnace in steel mills are close to the high point, and it is difficult to increaseRecent iron ore futures prices continued to strengthen. For example, at the beginning of February this year, the price of the main contract 1909 was 578 yuan per hand. By May 28, the price had risen to 742 yuan per hand. Data show that many varieties of iron ore forward spot prices from the beginning of the year up more than 30 per cent. 

         Steel mill profit levels with the recent surge in ore prices and rapid decline.Why iron ore futures surged? Senior industry experts told reporters that supply and demand determine the general trend of futures prices, the cost determines the price of the upper and lower limits, which means that steel production costs determine the lower limit, the downstream capacity determines the upper limit; And the general level that capital decides price, often reflect a rising tide lifts all boats; Policy periodically changes supply and demand and expectations, and market sentiment determines the pace of prices.Market participants said that objectively speaking, supply constraints and downstream building materials demand growth is the main reason for the surge in iron ore prices.

         The NDRC's price monitoring center points out that iron ore prices have risen significantly twice this year. A dam burst at an iron ore mine in southeastern Brazil on Monday, disrupting expectations of global iron ore supplies and sending international prices sharply higher and domestic prices sharply higher. After April, the production limit in China's winter heating season ended, the blast furnace gradually resumed production, iron ore replenishment demand increased, adding to the shortage of foreign mine shipments, domestic port inventory continued to decline, iron ore price shock upward again. Meanwhile, supplies have been slowed by the impact of recent hurricanes on shipments from three of Australia's largest mines.However, experts believe that iron ore should be viewed rationally after the market. In terms of supply, China's iron ore inventory at ports is 127 million tons at present. 

         Although the inventory has declined in recent days, it is still at a high level. According to institutional data, on May 20 solstice 26, Australia and Brazil iron ore shipments totaled 22.412 million tons, up 368,000 tons from last week, and up 10.183 million tons from late march. The growth of shipping volume is expected to drive iron ore to port in the later period to recover. Overall, iron ore port inventory supply is adequate.Zhang yan, an iron ore researcher at everbright futures research institute, said the four biggest mines had the least shipments in early April, due to the mine disaster, hurricane and heavy rains in northern Brazil. If the four major mines are to meet their annual targets, shipments will inevitably increase in the later period. On the basis of the first quarter delivery level, 12 million tons per month will be added in the next nine months for the four major mines to meet the annual target. Later with the increase in shipments of four major mines, iron ore supply and demand contradictions will ease.Ma liang, a researcher at guotai junan futures industry service institute, said the closure of some vale projects was temporary and some projects would be lifted in the future. Considering that ore prices above us $100 per ton can be maintained for a long time, domestic mines and many international mines are in a position to make profits and have strong incentive to resume production, which can make up for the supply reduction brought by mainstream mines.In terms of demand, according to the latest data of the steel association, in the early part of April, according to the average daily output of member iron and steel enterprises, the national daily output of pig iron was 2.1631 million tons, up 1.37% month-on-month. 

        Small increases in pig iron production will not have a further impact on demand for iron ore. At present, the utilization rate and capacity of blast furnace in steel mills are close to the high point, and it is difficult to increase in the later period.Yu Chen, a senior analyst, said that iron ore prices have risen to a high in recent days, and iron ore prices in June may face a correction due to the market's fear of heights.Ma liang believes that China's crude steel production from 2018 began to increase significantly, driving demand for iron ore. If the steel mill profit falls back to the low range, is bound to affect the steel mill production enthusiasm, the demand for iron ore to form repression. At the same time, if the cost of molten iron is high, it will face scrap replacement, reducing the dependence on iron ore to a certain extent.Industry insiders told reporters, the iron ore surge once again enlightens the steel industry, to avoid the risk of material price fluctuations, without futures hedging. One steel mill owner, who benefited from hedging in the futures market, told reporters that the modernization of the operation determines that steel companies should not hesitate to use derivatives, but should think about how to use futures correctly to protect their operations.（From csteel news)