Recently, the rapid decline of iron ore prices has caused widespread concern among market participants.

According to South China Futures data, the South China iron ore price index started to fall in mid-July after seven months of high volatility since the end of 2020. It dropped from the stage high of 1160.83 points on July 16 to 749.20 points on August 23, and then recovered slightly.Up to the press on August 29, the cumulative decline of 28.99%, the largest drop of 35.46%.

To understand institute senior experts and economists Song Qinghui in an interview with "securities journal" reporter said that the iron ore prices fell sharply, in addition to China's crude steel output fell in July and crude steel production is expected in the future years to the relevant weak outside, still around deployment of steel production in the second half of this year and reduce work,Capacity cuts have led directly to the continued weakening of demand for iron ore.

According to securities Daily, CISA released crude steel production data of domestic provinces in July on August 20, among which, the top five provinces of steel production, Hebei, Shandong, Shanxi, Jiangsu and Liaoning respectively decreased 19.51%, 14.2%, 9.31%, 2.27% and 0.9% year-on-year.The average daily crude steel output of 25 provinces fell, and the average daily crude steel output of the five provinces fell.

Warburg Securities steel industry analyst Zhang Jin believes that China's crude steel production capacity will be further reduced this year.

According to estimates, from August to December this year, Hebei, Shandong, Shanxi, Liaoning and Jiangsu need to reduce their steel capacity by 15.83 million tons, 9.2 million tons, 5.57 million tons, 3.48 million tons and 6.47 million tons, respectively, to achieve the target, Zhang jin said.

Du Meng, chairman of China Enterprise Capital Alliance, said in an interview with Securities Daily that reducing crude steel production is a necessary adjustment to the domestic steel market, which is conducive to restraining the rapid rise of raw materials.

Du Meng believes that China's iron ore imports in 2020 reached 1.17 billion tons, and the iron ore price went out of new highs before April this year, which has deviated from market demand and industry fundamentals.At the same time, the continued growth of domestic crude steel production, to a certain extent boosted the price of imported iron ore further rise.

"In May this year, iron ore and steel prices fell sharply in the same period. After half a month, iron ore prices rose again, but steel prices fluctuated and fell.In June this year on the crude steel production reduction measures substantive progress, followed by July iron ore prices again shock down, indicating that the reduction of crude steel production to curb the rapid rise of iron ore prices has achieved preliminary results, but there is still a gap from the return to the market fundamentals, the foundation is not firm, the reduction of crude steel capacity still needs to continue."Du Meng said.

So, iron ore prices continue to fall and reduce crude steel capacity will have what impact on steel enterprises?

Song Qinghui thinks, from the perspective of supply and demand of iron and steel industry chain, along with efforts to reduce crude steel production capacity increase and a decline in iron ore prices, or to direct form for iron and steel enterprises in the future, to make it in the second half of the profits have greater security, compared with some strength of large enterprises will get the more market cake.

On the question of which commodities will follow the iron ore trend in the future, Song qinghui said copper, soybean and other commodities prices may peak down.