Despite being in midsummer, steel companies have a chilling sense when analyzing the current situation of the entire steel industry.

On August 13, China Baowu News published an article titled 'Promoting the Deep Integration of Calculation-based Operation and Integration Synergy.' The article pointed out that the steel industry is currently facing a more severe and complex operating situation than last year, with the three characteristics of 'long cycle,' 'reduction of production,' and 'structural adjustment' becoming more apparent. This round of steel 'severe winter' is likely to be longer, colder, and more difficult than expected.

According to Ansteel Group's official account, on August 15, Ansteel Group held an analysis meeting on economic operations for July 2024. When analyzing the severe situation of the current steel industry, the meeting also pointed out that the current steel industry situation is more severe than in 2008 and 2015, and companies will face unprecedented difficulties and challenges. All cadres and employees of Ansteel Group should have a clear understanding of the current market situation and be prepared to fight hard.

Undoubtedly, the predictions of many steel companies on the challenging industry outlook have made several major international iron ore miners, which are their upstream industries, start to have a difficult time.

Since the beginning of this year, the price of this key steelmaking raw material has fallen by more than one-third, and the market cap of the "four major" iron ore miners, BHP Group Ltd., Rio Tinto, Vale SA, and Australia's Fortescue Metals Group, has evaporated by about $100 billion in total.

According to pricing agency Argus, the price of iron ore shipped to Qingdao Port has now fallen to $92.2 per tonne, the lowest level since November 2022, and is also below the key integer mark of $100. At this price, some high-cost iron ore production has become unprofitable.

Vivek Dhar, Director of Mining and Energy Research at the Commonwealth Bank of Australia, said, 'The financial market has reason to worry that the iron ore price may remain below $100 per tonne in the short term.'

Mining companies are experiencing the "harsh winter" in advance.

For a long time, iron ore has been a "cash cow" for global mining giants such as BHP Group Ltd. and Rio Tinto. However, many mining executives seem unconcerned about the recent decline in demand.

Jakob Stausholm, CEO of Rio Tinto, stated in a recent media interview that even if the steel demand in China's real estate sector dropped by 0.1 billion tons, the energy transition from 2020 to 2023 would bring a growth of 40 million tons. Compared to the global iron ore production of 1.9 billion tons last year, this is just a drop in the bucket.

However, recent trends in the entire industry may have forced mining giants to take action. Some analysts suggest that large mining conglomerates may adhere to discipline to prevent a sharp collapse in iron ore prices. In fact, shipments from Australia and Brazil have already started to slow down, with July's data indicating a sharp decline in shipments.

Previously, both BHP Group Ltd. and Vale SA achieved record iron ore production in the first half of 2024, and the inventory of this commodity at Chinese ports has been increasing. Data from SteelHome shows that iron ore inventory at Chinese ports has grown by 28% compared to the same period last year, reaching 0.154 billion tons.

Bob Brackett, mining analyst at Bernstein, said, "The iron ore industry is very organized. Global mining giants control their own supply chains. Just like OPEC wouldn't allow excessive oil flooding the market, if the market doesn't need their iron ore, they will also slow down production."

Currently, it is generally expected that among the large iron ore miners, Fortescue will be more impacted than other giants - the company's revenue comes from iron ore by more than 90%. Analyst Paul McTaggart from Citi commented that the company's exposure to the commodity has proven to be "problematic."

Of course, the smaller and medium-sized mining companies are likely to have a tougher time compared to the four major mining giants.

Wood Mackenzie's senior manager of bulk commodities, Cicero Machado, stated, "Although the downward pressure on iron ore prices is expected to squeeze the profits and dividends of major miners, producers in China, Malaysia, and South Africa, as well as smaller companies, will feel the greatest pain. They will be the first to feel the impact, and if the prices continue to decline, they are likely to be squeezed out of the market."