The anti-internal-competition policy has taken effect, and iron ore prices have soared by nearly 2%, reaching a four-month high!

The sixth meeting of the Central Committee for Financial and Economic Affairs focused on “internal competition” and explicitly proposed “promoting the orderly exit of backward production capacity”. After the policy signal was clearly issued, industries such as steel, photovoltaic, and cement responded quickly, with frequent production cuts. The market generally expects that industries like coking coal will undergo a new round of supply-side capacity reduction measures, leading to supply contraction and an increase in raw material prices. The spot market for coking coal has shown a “price and volume increase”, significantly pushing up the costs of coke and steel.

Recently, the “anti-overcapacity” policies and traditional industry upgrading policies have continuously boosted market sentiment. Coupled with the speculation over the steel production restrictions in Shanxi Province, the black steel market index have maintained a relatively strong trend. However, as there is still profit potential for steel mills, the actual reduction in production is limited, and the short-term supply-demand imbalance has not been substantially alleviated.

The current market trading logic is still dominated by policy expectations, with the driving force of industry fundamentals being relatively weak. The market may maintain a high-level oscillation. If the subsequent policy implementation fails to meet expectations, it is necessary to be vigilant against the adjustment risks brought about by the cooling of market sentiment; however, if the production restriction policies further intensify or the demand side shows improvement, there is still some upward potential for steel prices.