Iron Ore Price Hikes Draw Beijing’s Attention, Traders Summoned

Beijing (China): In an effort to ward off potential inflation in commodities due to the Chinese economy's rebound, China's National Development and Reform Commission (NDRC) has requested a number of domestic iron ore traders and brokerages to provide their recent trading records for both physical and futures markets. At least five of these entities have been summoned to a meeting on Tuesday with NDRC officials. The people involved in the meeting have chosen to remain anonymous due to the private nature of this information.

Following an unprecedented surge in iron ore futures of nearly 60% from the end of October to last Friday, fears of government intervention caused a sudden drop on Monday. This rally was largely attributed to optimistic hopes that China's economy would experience increased infrastructure and construction activity as it expands this year.

In response (NDRC) requested information from domestic iron ore traders and brokerages ahead of a meeting to discuss the recent market trends. The Department of Price has customized strategies in the past to counteract inflated prices in commodities such as coal, soybeans, and now iron ore.

Iron ore exports account for 70% of the global market and are very sensitive to expectations of government stimulus. This has prompted increased forecasts for Chinese growth since President Xi Jinping ended Covid Zero, resulting in a price surge across raw materials such as copper ($9,000/ton) and BHP Group shares hitting a record high.

To gain more control over the resource's imports, China formed a new state-owned entity called China Mineral Resources Group that obtains iron ore on behalf of the nation's steel mills. Last week during a briefing, Zou Lan from the People's Bank warned authorities not to let their guard down despite mild inflation this year, as prices could increase due to rapid money supply growth and imported inflation.

(NDRC) expressed their “high concerned” regarding iron ore's market behavior in the first week of 2023, prompting them to bolster their monitoring of the resource. Citigroup Inc. further recognized that iron ore was being traded like a financial asset, despite fundamentals not matching its recent price hikes.