I. Core Details of the Price Adjustment

II. Four Core Reasons for the Price Hike

1. Rigid Cost Increase on the Supply Side

   Ore grade decline in core mining areas (e.g., Serra Norte) has led to higher mining and beneficiation costs. Global iron ore production capacity decreases by 50-60 million tons annually due to resource depletion, pushing up marginal production costs.
2. Demand Support from Downstream Industries

   China's infrastructure projects continue, with marginal recovery in the real estate sector, stabilizing pig iron output. Steel mills in Southeast Asia and the Middle East are expanding production. According to forecasts, global iron ore demand will grow by 1.3% in 2026, with demand outside China increasing by 2.2%.
3. Limited Growth in Global Supply Capacity

   Global iron ore production capacity is expected to increase by approximately 47 million tons in 2026, but the commissioning progress of the Simandou mine is slower than expected. Although Vale's S11D expansion project contributes to supply growth, the output of high-grade ore (e.g., IOCJ) is shrinking.
4. Adaptation to Pricing System Adjustment

   Platts lowered the benchmark iron ore grade from 62% to 61% Fe. Vale adjusted the LTC price synchronously to match the new pricing standard, maintaining the stability of per-ton-unit value.

III. Three-Tier Impact on the Industry Chain

1. Impact on Steel Mill Costs and Profits

   The cost per ton of steel is expected to rise by about 30-40 yuan. Small and medium-sized steel mills with high reliance on imported ore will face greater profit pressure, which may accelerate industry restructuring.
2. Impact on Steel Export and Trade

   Rising raw material costs will provide support for steel prices. Export quotations need to include a "raw material price fluctuation clause". For EU customers, the cost pressure will be further amplified due to the 叠加 of Carbon Border Adjustment Mechanism (CBAM).
3. Impact on Global Supply Chain Layout

   Chinese steel mills will accelerate the optimization of ore blending structure, increasing the proportion of low-grade ore. Traders will turn to alternative ore sources such as Australian ore, African ore and Russian ore to reduce dependence on Brazilian ore.

IV. Practical Response Strategies for Foreign Trade Enterprises and Steel Mills

1. Cost Control Package
   • LTC + Futures Hedging: Lock in 60%-70% of raw material procurement volume, and use iron ore futures to hedge price fluctuations risks.
   • Ore Blending Optimization: Increase the proportion of low-grade ore and mix with domestic concentrate to reduce the share of high-priced ore and control comprehensive costs.
2. LTC Negotiation and Pricing Optimization
   • Strive for Tiered Pricing: Negotiate preferential prices based on large procurement volume, and set price caps to reduce cost volatility risks.
   • Adjust Pricing Cycle: Change monthly pricing to biweekly pricing to respond to market changes more quickly.
3. Market and Order Strategy
   • Export Quotation: Add a "raw material benchmark price adjustment clause" in FOB/CIF prices, clarifying the trigger conditions and adjustment range of price changes.
   • Customer Stratification: Provide stable supply and carbon footprint reports for high-end customers to enhance product premium; recommend cost-effective alternative ore varieties for price-sensitive customers.
4. Supply Chain Diversification
   • Expand procurement channels of Australian ore, FMG ore and African ore to reduce single-source dependence on Vale.
   • Participate in the development of domestic mineral resources to improve the self-sufficiency rate of domestic ore and hedge against the risk of imported ore price fluctuations.

V. Risk Tips and Follow-up Tracking Indicators

• Risk Points: Accelerated commissioning of Simandou mine, weaker-than-expected demand in China, and exchange rate fluctuations may lead to a correction in ore prices.
• Tracking Indicators: Weekly Platts Index, China's port ore inventory, pig iron output, and Vale's ore shipment volume, so as to adjust strategies dynamically.