Iron ore prices fall after China warns of “excessive speculation”

The price of iron ore, the steel component, has fallen sharply after China had previously stated that it would focus on cooling soaring prices and warned that it would “excessive speculation” with concerns about rising inflation.

The National Development and Reform Commission, China’s economic planning agency, said on Monday that it will crack down on the monopoly of the commodity market, the spread of false information and the accumulation of hoarding.

On Monday, the news caused an uproar in the market. On China’s Dalian Exchange, the main iron ore futures contract fell 7% to 1,049 yuan (US$163) per ton.Since the hit, the iron ore has lost nearly a quarter of its value Record high at the beginning of this month. Aluminum futures contracts for July delivery on the Shanghai Exchange fell 3%.

The Chinese government’s statement reflects its Soaring commodity prices, Which was accelerated by the country’s recovery from the pandemic. The prospect of a global economic rebound has further exacerbated price increases.

“I think there is more and more evidence of speculative excess,” said Robert Rennie, head of market strategy at Westpac. He hinted that Beijing might intervene further. He said that strong Chinese demand and a rebound in global demand are the main drivers of price increases.

So far, China is the world’s largest consumer of commodities, and rising raw material prices have directly affected production costs. After falling for most of 2020, the country’s factory gate prices rose by 6.8% year-on-year in April.

The National Development and Reform Commission said in a statement after a meeting with major Chinese metal producers that the price increase was related to factors including “excessive speculation” and warned companies not to unite to manipulate the market.

Last week, China Central Television (CCTV) cited a meeting hosted by Premier Li Keqiang, saying that measures should be taken to prevent commodity price increases from being passed on to consumer prices. These comments led to a sell-off of commodities on Thursday.

Compared with the producer price index, China’s consumer price index has been at a low level, and consumer demand has lagged behind the industrial recovery. CPI rose 0.9% year-on-year in April.

At the end of last year, China’s economy reached its pre-pandemic growth rate. In 2020, as part of an industry-driven recovery, the company produced a record amount of steel due to the early impact of the coronavirus. This shock promoted the prosperity of the construction industry and increased Australia’s demand for iron ore.

attempt Curb carbon-intensive steel productionPart of the effort to achieve the new environmental goals, due to expectations of tight supply, helped push up prices earlier this year.

“You may be worried about one of the reasons for hoarding at this moment… “The Chinese authorities have basically told the industry that they want to reduce steel production to record levels. “Raney said.

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