China’s government is attempting to push back on commodities inflation, starting with iron ore prices, where, according to the communist government’s National Development and Reform Commission, there is rampant speculation driving prices. Thomas Hale reports for the Financial Times:
The price of steelmaking ingredient iron ore fell sharply after China signalled it would focus on efforts to cool soaring prices, warning of “excessive speculation” as concerns grow over rising inflation.
The National Development and Reform Commission, China’s economic planning agency, said on Monday it would crack down on monopolies in commodities markets, the spread of false information and hoarding.
That message rippled through markets on Monday, with the main futures contract for iron ore dropping 7 per cent on China’s Dalian exchange to Rmb1,049 ($163) a tonne. It has fallen almost 20 per cent since hitting a record high earlier this month. The aluminium futures contract for July delivery dropped 3 per cent on the Shanghai exchange.
Steel prices were also lower, with the main contract for reinforcement bars — a product widely used in the construction industry — sliding 4 per cent and hot-rolled coil also off 4 per cent.
The Chinese government’s statement reflects its mounting concerns over soaring commodity prices, which have been turbocharged by the country’s industrial recovery from the pandemic. The prospect of a global economic rebound has added more fuel to the rally in prices.
“I think there is increasing evidence of speculative excess,” said Robert Rennie, head of market strategy at Westpac, who suggested further intervention from Beijing was likely. Stronger than expected Chinese demand and returning global demand had been the main driver of prices, he said.
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