Commodities, Finance, Iron ore, News

Iron ore was rallying, then China intervened

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The iron ore price had reached an 18-month high this week, before a China intervention stopped the commodity in its tracks.

According to Mysteel, the price for 62 per cent seaborne Australian iron ore fines at the port of Qingdao had been hovering above $US130 per dry metric tonne (dmt) between November 14–22. It rose to an 18-month high of $US135.5 ($206.6)/dmt on Wednesday.

This prompted an investigation from China’s National Development and Reform Commission (NDRC) and other Chinese regulators, who engaged iron ore trading companies to scrutinise spot and futures trading activity.

The NDRC informed the market on Thursday that an investigation was taking place, with a release including statements such as “manipulation of the futures market”, “price gouging” and “misinformation”.

“NDRC and other authorities will closely track market trends and step up supervision on spot and futures prices of iron ore,” the statement said.

It wasn’t long before NDRC’s proclamation affected iron ore trading, with 62 per cent seaborne Australian iron ore fines at the port of Qingdao dropping $US1.5/dmt on the day to $US134 ($204.4)/dmt on Thursday.

Mysteel said “market optimism was cooled by Beijing’s vow to further tighten market supervision”.

The iron ore price rallied to new highs this week as rumours swirled that Chinese authorities had drafted a list of 50 real estate developers in line for funding support.

In late-October, the Chinese Government announced the approval of more than one trillion yuan ($215 billion) of sovereign debt issuance, set to help keep China’s economy afloat over the coming months.

A Shanghai-based ferrous analyst told Mysteel that weakness in iron ore futures could continue amid NDRC’s announcement.

“But the futures may find stimulus from positive market sentiment at some point, as market insiders may expect more economic policies to be unveiled during the Central Economic Work Conference to be held in Beijing next month,” the analyst said.

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