The Fed's interest rate hike may indeed lead to a fall in global iron ore prices, but don't expect steel prices to fall too much in the short term. Yesterday, the Federal Reserve announced that it would raise interest rates by 75 basis points, which is rare in history, but there is no way. After all, the inflation pressure in the United States is very high at present, and the CPI has reached more than 8%. If we don't raise interest rates substantially, it will be difficult to curb the pressure of inflation. In addition, this will not be the last time the Fed raises interest rates. In the remaining months of 2022, it is expected that the Fed will raise interest rates two or three times, and market liquidity will be further reduced. After the Fed raises interest rates, it will be bad for commodities including iron ore.

On the one hand, in the context of the continuous interest rate hike by the Federal Reserve, the market liquidity is reduced, the funds available for investment in the capital market are reduced, and commodities lack upward momentum; On the other hand, in the case that the Fed keeps raising interest rates, the dollar will continue to strengthen, which will attract more capital to buy dollars, so the impact on other commodities is still relatively large. Therefore, in the context of the continued strength of the US dollar, it is expected that the prices of some commodities, including iron ore and oil, may fall in the future. In addition, as far as the China market is concerned, there are many negative factors in the iron ore market at present, such as the China steel market entering the off-season.

Now is the rainy season. It may rain in many places in our country this year, especially in the southern provinces, which are not suitable for construction and many projects may be postponed. Therefore, it is expected that the market demand for steel will decrease in the next few months. At present, the profit margins of major steel mills are relatively small, and even some steel mills are at a loss. In the context of slowing market demand, many steel mills may reduce their production capacity in the future, so the demand for iron ore will decrease, and the corresponding iron ore price may fall.

Against the background of China's slow demand for iron ore, in fact, the international iron ore price has dropped significantly recently. At present, Platts 62 iron ore index has dropped from about 160 to about 130 at present, and it is expected to drop further in the future. After comprehensive consideration of various factors, it is expected that the international iron ore price will drop sharply in the future. According to the Australian Bank's forecast of iron ore price, the iron ore price will drop to 120 USD/ton before the end of September 2022, and will drop to 100 USD/ton by the end of the year. In 2023, the price of iron ore will further drop by 20%, reaching $80/ton, and this level is expected to remain until 2025.

Once the price of iron ore drops, the raw material cost of steel mills will drop, and the corresponding ex-factory price of steel will also drop. Of course, as for how much steel will decline, besides the performance of iron ore, it depends on the price of other steel production costs, especially the performance of coke prices. Since 2022, the price of steel has risen. Apart from the rise of iron ore, there is also a very important reason, that is, the price of coke has risen significantly. At the beginning of the year, the price of coke was only about 2800 yuan, but by the end of April, the highest price reached 4300 yuan, which directly led to the rise of steel prices.

It was only after May that the price of coke began to drop significantly again. Although there was a wave of rising prices at the end of May, overall, the price of coke has been declining recently. In addition, there are at least three bad news for the coke market. One is that the Fed's interest rate hike will suppress the price of coking coal in the international market; On the other hand, the opening of the Tagan Railway, a special Mongolian coal transportation line to be opened in July, will greatly increase Mongolia's coking coal exports to China. Another is that China may resume importing Australian coking coal in the second half of the year, which will greatly ease the tight supply of domestic coking coal.

Therefore, combining these factors, the price of coke may continue to decline in the future, so the production cost of steel will further decline. Judging the future trend of international iron ore price and domestic coke price comprehensively, it is predicted that the overall raw material cost of steel will decrease in the future, and the corresponding steel price will also decrease accordingly. But don't expect the steel price to drop too significantly. Although steel demand in China has entered the off-season, it is a fact that iron ore stocks in major ports are decreasing.

For example, from June 6 to June 12, the total amount of iron ore delivered to China Port 45 was18.907 million tons, a decrease of 31450,000 tons from the previous month; The total arrival volume of the six northern ports was 8.878 million tons, a decrease of 2.43 million tons from the previous month. In the context of the reduction of iron ore arrival in Hong Kong, it is estimated that the domestic iron ore price will not drop too much, which means that the production cost of steel will not drop too much in the future. On the whole, the future steel price will be in a state of relative shock and decline, and it is estimated that the ex-factory price of steel may fluctuate between 3500 yuan and 4800 yuan.