Chapter 129: Iron ore is about to rise

ps: Continue to ask for support, thank you everyone.

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During the first Spring Festival of the new century, Zeng Lingfeng's home was very lively. Zeng Chuipu is now the mayor of a municipality directly under the central government. During this New Year, officials who are closer to him will come to pay New Year's greetings.

However, these have little to do with Zeng Lingfeng. He has his own affairs. It can even be said that he is even busier than his father. The main thing is to pay New Year's greetings. Uncles, aunts, teachers and classmates in the city, plus ordinary leaders such as Mr. Deng and Premier Zhu in the capital, they have to go through all aspects.

Zeng Lingfeng arrived in the capital on the sixth day of the first lunar month.

When you arrive in the capital, you must go to the old man first.

The old man was very happy about Zeng Lingfeng's arrival.

However, before Zeng Lingfeng sat down for long, another visitor came to the old man's house.

"Ling Feng is here, he's such a rare guest." As soon as Premier Zhu entered the door, he greeted Zeng Lingfeng, just like the old man's house was his own.

Zeng Lingfeng didn't take this trick at all and asked directly: "Uncle Zhu, tell me, what else do you have to do?"

Premier Zhu showed a rare embarrassment.

It turned out that this time it was caused by iron ore.

Because domestic construction has been very hot in the past two years, many places believe in the strategy of "working hard and getting ahead". The domestic demand for steel has increased rapidly. Last year, the cumulative amount of iron ore imported throughout the year exceeded 100 million tons, becoming the world's second largest iron ore importer.

Seeing the huge demand for steel in China, as well as the innate limitations of the country's insufficient reserves of iron ore and the extremely low grade, Vale, Rio Tinto and BHP Billiton, three major iron ore giants jointly proposed a motion to increase iron ore prices, and subsequently negotiated with the country very tough.

Premier Zhu had no choice but to find Zeng Lingfeng, the iron ore giant, hoping to increase imports from the iron ore of Hanyu Mimeng Group.

As soon as he heard Premier Zhu’s request, Zeng Lingfeng immediately refused. He was patriotic and knew the situation in the country. However, any industry has its own rules. If you want to get involved, you must abide by this rule. It is true that Hanyu Mimeng Group is the number one iron ore giant, but the iron ore reserves it has mastered are only 30% of the proven reserves. With the combination of the other three giants, Hanyu Mimeng Group has no advantage, but is at an absolute disadvantage. If Hanyu Mimeng Group does not abide by the rules of the game, then the one who is injured will be Hanyu Mimeng Group first.

"Uncle Zhu, please forgive me for being unable to accept your request. I was a businessman first, and I could not do such a thing that was of no benefit. Moreover, such a thing could not fundamentally solve the problem. In the end, it would only cause both my mining company and the country to be injured, and the one that was cheaper was the other three mining giants. I think you can see clearly the result of this." Zeng Lingfeng said.

Premier Zhu nodded, and he also knew that his request was too much, and as Zeng Lingfeng said, the fundamental problem could not be solved.

"Uncle Zhu, I told you last year that the country has already made the macro-control of some industries that are related to the future and destiny of the country. However, in the past year, I basically didn't see much action, especially the steel industry. The situation was even more chaotic than the previous year. Some steel companies even took the initiative to increase the price of importing ore. This behavior of harming oneself and benefiting others is really difficult to understand." Zeng Lingfeng said angrily.

"Uncle Zhu, I understand the concerns and huge resistance of the country when conducting macro-control. However, there must be no hesitation in such major events that concern the destiny of the country and the nation. In my opinion, when necessary, strong measures must be used to implement the country and achieve the overall control of the country." Zeng Lingfeng became a little excited again.

Any voice in the international commodity market is based on strength and backing. Resource strength determines the voice, which is particularly prominent in the supply and demand pattern of the seller. The world's three major iron ore producers, namely the Brazilian Vale Company, Rio Tinto Australia and BHP Billiton, monopolizing more than 50% of the world's iron ore market. Not only that, monopoly suppliers also rely on their resource strength to use various excuses and try every means to compete for price increase in various ways. For example, BHP Billiton, a supply giant of Australian mines, proposed to change the current pricing rules and advocated that long-term contract prices should be adjusted based on the spot price index; Rio Tinto's price in view of the continued increase in sea freight costs, which has led to its price being "very cheap" and "suffering a big loss" compared with Brazil and Indian mines, and even proposed to compensate sea freight costs at the level of land price, etc.

The market is ruthless, and the strength of economic resources determines whether a country has the right to speak. In recent years, the expected development of my country's steel industry has led to increasingly tense supply and demand relationships between iron ore. In addition, the domestic steel industry is limited to industrial thinking in terms of diversification of resource products, lacks strategic vision and alternative means of preservation of value, and is too dependent on major overseas iron ore suppliers. Therefore, in the seller's market, Chinese steel mills can only accept the sharp price increase of imported ore and have no choice.

"my country's spot iron ore import market is chaotic and disorderly, lacking a unified procurement price caliber for the outside world, and the low industry concentration is also an important factor that restricts my country's steel companies from repeatedly failing during the annual negotiations of the long-term mine; although my country is the second largest iron ore importer in the world, the increase in ore sea freight accounts for about 50% of the global iron ore sea freight, it has never really grasped the pricing power in terms of sea freight costs." Zeng Lingfeng said angrily.

"Learn from the pain, if my country's steel companies want to completely reverse their passive position in iron ore negotiations, gain the initiative in negotiations, and compete for initiative in the international market, they must link internally and externally, "go global" externally, increase industrial concentration internally, unify external price inquiries, crack down on speculative behaviors such as "backed from the backdoor" imported iron ore, and control sufficient iron ore resources, otherwise everything will be empty talk."

"Accelerating the integration and restructuring process of the domestic steel industry, optimizing the iron ore import market, and improving the industrial concentration. At present, the number of iron ore import companies in my country is too large and scattered, and the lack of necessary unified coordination and self-discipline mechanisms is the main reason why the blind import of iron ore and foreign iron ore providers compete to raise prices. As time goes by, the steel industry concentration has not increased but decreased. The overly scattered raw material procurement and supply system is one of the important reasons why my country's iron ore price negotiations are in trouble."

"As a countermeasure, under the promotion of the government and industry associations, we should vigorously promote the joint recombination of cross-regional and cross-ownership steel enterprises to form a world-class steel enterprise group with international competitiveness to enhance the bargaining power of enterprises. This is an important weight to change the lack of international pricing power of iron ore in my country and improve the weight of negotiations. We should resolutely control the expansion of production capacity of small steel enterprises at a low level, resolutely eliminate backward steel production capacity with high energy consumption, low added value and high raw material consumption on time, and accelerate the elimination of local small steel enterprises and

The recombination process of the domestic steel industry will improve the concentration of the domestic steel industry and the unification of the external negotiation caliber. Further reduce the number of enterprises with qualifications for importing iron ore, strengthen the implementation of information reporting and registration system for the qualifications of imported iron ore enterprises, and encourage the development of agency systems, sign as many long-term agreements as possible, restrict and severely crack down on steel companies and traders who do not have the qualifications for importing iron ore inquiries, "backed from the backbone" of imported iron ore, and severely punish illegal transactions such as reselling imported iron ore at high prices."

"Accelerating the implementation of the "going out" strategy of steel enterprises and building a long-term and stable raw material supply industry chain. Actively encouraging domestic powerful enterprises to "going out" has become the only way for my country's steel enterprises to break the monopoly of international iron ore giants. In the context of economic globalization, through equity participation, investment and holding, etc., we will increase the efforts to explore and purchase overseas iron ore resources through various means, build a long-term and stable raw material supply industry chain, establish steel plants abroad, and sell steel on-site in the international market, so as to stabilize the international steel prices. Only by fundamentally solving the supply and demand balance problem of steel can we truly stabilize the iron ore prices."

"Domestic steel companies are encouraged to participate in the maritime business, increase the proportion of long-term charter agreements, and strengthen the control capacity of sea freight costs. Data shows that in my country, the second largest iron ore importer, the increase in the maritime ore shipping accounted for about 50% of the global iron ore shipping increase. However, in terms of sea freight fees, the main reason is that the proportion of long-term charter agreements is too low. The proportion of long-term charter agreements of Japanese iron ore importers is as high as 70%, leaving little room for speculators for speculation, so sea freight fees are relatively stable. However, Chinese companies still use spot bidding and chartering methods in iron ore import business, and long-term iron ore contracts.

The shipping volume accounts for only about 5% of the country's imported iron ore, giving speculators a lot of opportunities to take advantage of. In addition, the separation of sea freight and iron ore imports has also led to a large fluctuation in freight rates. In Japan and South Korea, many steel companies themselves operate maritime business. Even those steel companies that do not have maritime business themselves have mostly cross-holding shares with maritime giants to form a community of interests. my country's iron ore import companies rarely have similar businesses, resulting in a significant increase in the risk of maritime price. Large domestic steel companies with strong domestic power should jointly build iron ore transport ships with maritime companies, which is also one of the effective ways to improve the ability to control freight costs."

"The domestic steel industry should also focus on the use of the auxiliary value preservation function of the futures and financial derivatives markets while maintaining the traditional iron ore valuation method to lock in expected costs."

"Ling Feng, I know that what you said is true, and the solution you gave is also very good. But it takes time, whether it is internal integration or going out. However, the three major iron ore giants will not give us much time. According to reliable information, they decided to raise prices in a short period of time." Premier Zhu said tiredly.

"Okay, Uncle Zhu, I can help and delay this matter for a while, but it won't be too long, at most it will only be half a year. If the time is longer, I can't do it." Zeng Lingfeng said.

"Okay, it will be enough for half a year. The government is introducing a macro-control policy for the steel industry. Within half a year, this policy will definitely take effect." Premier Zhu said excitedly.

Zeng Lingfeng asked: "Uncle Zhu, what are the plans for the country to integrate the steel industry?"

"We plan to form ten large steel groups based on ten larger steel companies such as Du Iron and Steel Company. Each steel group will produce more than 10 million tons." Premier Zhu's tone seemed a little excited.

Zeng Lingfeng shook his head and said, "Uncle Zhu, it's not enough. I think it's finally integrated into three to five large steel groups. Only in this way can we gather strength to the maximum extent and compete with the three major mining giants. Otherwise, the combined force formed will still be too weak and will not play a fundamental role."

"At least half of these three to five large steel groups rely on large domestic iron ore, and the other one to two are mainly imported iron ore. The best thing is that only one steel company imports iron ore. In this way, the sound we make will truly attract people's attention." Zeng Lingfeng said.

Premier Zhu frowned and said, "This is good, but it is too difficult, I still have to think about it carefully."

Zeng Lingfeng also knew that the resistance to doing this would definitely be very large. If only three to five large steel groups were retained in the country, then steel companies in many provinces would be merged, which is a situation that those provinces would definitely not want to see. If too many provinces oppose it, it would be unlikely to achieve macro-control.

However, this is the best solution to the problem of iron ore imports. If this is not the case, there is no capital to negotiate with the three major iron ore giants, and will eventually return to the old path. You must know that in Zeng Lingfeng's memory, even if the country later formed the Oriental Steel Group, which produces more than 10,000 tons of steel annually and has an asset of 100 billion US dollars, it still cannot control the pricing power of iron ore. This is a very painful lesson. Zeng Lingfeng does not want such a situation to occur in this life, which is a disaster for the entire country. You must know that the rise in iron ore prices, which is at the highest link in the steel industry, will directly rise.
Chapter completed!