[Ferro-Alloys.com]：

  Since November this year, the price of iron ore has skyrocketed. On December 11, the main contract futures price of iron ore surged to 1042 yuan / ton, a record high since iron ore are listed in 2013, and the closing price fell to 989.5 yuan / ton on the same day. On December 11, according to China's iron ore price index (CIOPI), the imported iron ore price index reached 574.42 points, a new high in nearly eight years. How to evaluate the recent soaring iron ore prices? And how to deal with it?

  Although there is a certain demand from steel mills for iron ore, it has seriously deviated from its original price and exceeded the industry expectations. According to China's iron ore price index, iron ore prices have risen by more than 65% since the beginning of this year, but steel prices have risen by less than 10%. Since November, iron ore prices have soared 31%. According to customs statistics, in November, China imported 98.15 million tons of iron ore, an increase of 8.3% year-on-year. In the first 11 months, China imported 1.073 billion tons of iron ore, an increase of 10.6% year-on-year. Data shows that the port inventory of imported iron ore on December 11 was 122.032 million tons, which still at a relatively high level. According to National Bureau of Statistics, in November, China's crude steel output was 87.66 million tons, an increase of 8.0% year-on-year; the average daily output of crude steel was 2.922 million tons, down 1.75% month-on-month. From January to November, China's crude steel output was 96.11 million tons, up 5.5% year-on-year.

  This shows that the supply and demand of iron ore have not been changed significantly, but the current iron ore market pricing mechanism has failed. This is due to the fact that traders invite bids abnormally to boost the index rise, futures market is close to the delivery month and some other factors. Therefore, hopefully, relevant government departments will take effective measures to intervene into the investigation timely, and severely crack down on the possible illegal behaviors in accordance with law.

  Indeed, the recent surge in iron ore prices has further increased the operational risk of the industry, which is not conducive to the stability of the industrial chain supply chain and is not sustainable. This has not only eroded economic achievements of China's steel enterprises during the COVID-19 pandemic, but also seriously weakened the market competitiveness of China's steel industry.

  For iron and steel enterprises, how to respond to this situation positively?

  Firstly, we should know the fact that the price of iron ore is seriously abnormal. Then companies should observe price changes calmly, and do not rush to purchase iron ore with high prices.

  Secondly, it is necessary for enterprises to improve operation quality and efficiency, effectively control the release of production capacity, increase the added value of products to better meet the demand changes of downstream industries.

  Thirdly, companies should strengthen the construction of upstream and downstream industrial chain, improve the ability of resource and energy security, especially pay attention to capital management and control, further improve the efficiency of fund utilization, control the debt level, and prevent capital risk.

  Fourthly, it is necessary to find errors from an all-round perspective to strive to reduce costs and increase efficiency. Meanwhile, professional experts also appealed, with upstream monopoly, high dependence on imports and high steel production, the iron and steel industry should increase the utilization of scrap steel and domestic ore and reduce their dependence on imported iron ore; reverse the traditional business thinking and use derivatives to combat risks, and reasonably and effectively safeguard their own interests in fighting against the skyrocketing price of iron ore.

• [Editor:Catherine Ren]