China vows crackdown on iron ore speculators causing ‘abnormal’ price swings
- State planners warn of ‘abnormal fluctuations’ in prices for the steel raw material despite stable demand and supply overall
- Hoarders, speculators and misinformation spreaders in cross hairs
China’s top economic planners have pledged to crack down on the speculative trading of iron ore and stabilise the domestic market after “abnormal” price rises in recent weeks.
State planning body, the National Development and Reform Commission (NDRC), warned of “abnormal fluctuations”, as the price of the key steelmaking ingredient rose by nearly 60 per cent from mid-November to US$138 per tonne.
“The government analysis found that the demand and supply is overall stable and domestic stockpiles are at their highest in years. We found a speculative factor in the recent fast price hike,” an NDRC statement released on Friday said.
The NDRC, which formulates China’s macroeconomic plans, said it would investigate the market price changes and crack down on hoarders, malicious speculators and misinformation spreaders.
We’ll consider taking more powerful and effective measures to ensure the stability of iron ore prices
“We’ll consider taking more powerful and effective measures to ensure the stability of iron ore prices,” the statement said.
China imports more than three-quarters of its iron ore, mainly from Australia and Brazil. This makes it vulnerable to price hikes. The average import price paid last year was US$164 per tonne, up 55.3 per cent from 2020.
As part of moves to curb inflation last year, the Chinese authorities called on iron ore traders to prevent price spikes and restrict futures trading, and also pressured global miners like Rio Tinto, BHP and Vale to increase supplies.
China’s crude steel output dropped 3 per cent to 1.03 billion tonnes last year. The fall was starkest in December, when output dropped 6.8 per cent year on year.
China trade strong in 2021, but signs of economic slowdown in December
This came as Chinese steelmakers reported record high profits last year, benefiting from the global commodities price hike.
The country’s 93 largest steelmakers posted a nearly 33 per cent rise in operating revenue to 6.93 trillion yuan (US$1.09 trillion), with combined profits up by 60 per cent from the previous year.
In its steel sector development guideline in January 2021, the industry ministry said China’s self-sufficiency ratio for iron needed to be above 45 per cent by 2025.
Its raw material development plan released in December said iron self-sufficiency would be “significantly” increased by lifting the supply of scrap steel to more than 30 per cent of the total.
