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The price of iron ore in steel components fell sharply after China said it would focus on price-raising efforts, warning of “excessive speculation” as concerns about rising inflation rise.
The National Development and Reform Commission, China’s economic planning agency, said on Monday that it will tackle monopolies in commodity markets, the spread and hoarding of false information.
That message reached the markets on Monday as the main futures contract for iron ore fell 7% in exchange for Rmb1,049 ($ 163) per tonne in Dalian, China. Iron ore has lost a quarter of its value since it struck record earlier this month. The July contract for the future delivery of aluminum fell 3 percent in exchange for Shanghai.
The Chinese government’s statement reflects its growing concerns increasing commodity prices, which have been turbocharged for the country’s industrial pandemic recovery. Global economic rebound forecasts have added fuel to prices.
“I think the evidence for speculative abuse is growing,” said Robert Rennie, head of market strategy at Westpac, who said further intervention from Beijing could be suggested. Stronger than Chinese demand and a return to global demand have been the main drivers of prices, he said.
China is currently the world’s largest consumer of raw materials and high raw material prices reach production costs. The country’s plant prices fell 6.8 percent annually after falling sharply in April 2020.
After a meeting with major Chinese metal producers, the NDRC said price increases are linked to factors such as “excessive speculation,” and warned companies not to join forces to manipulate markets.
Last week, CCTV state presenter mentioned a meeting of the state council chaired by Prime Minister Li Keqiang, in which they said measures should be taken to prevent the rise in commodity prices to pass to consumer prices. The notes affected the sale of raw materials on Thursday.
China’s consumer price index has remained low compared to the producer price index, as consumer demand has lagged behind to stimulate the industry. The CPI rose by 0.9% year-on-year in April.
The Chinese economy reached pre-pandemic growth rates at the end of last year. In 2020, it set record amounts of steel as part of an industry-driven recovery from the initial shock of coronavirus, fueled by growth in construction and increased demand for iron ore in Australia.
An attempt controlling the production of high-carbon steelPart of the effort to meet new environmental targets was helped by rising supply prices this year in line with expectations of supply cuts.
“One of the reasons he may have concerns about saving at the moment. . . The Chinese authorities, in particular, say they want to cut record levels of steel production in the industry, ”Rennie said.
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