China is taking fresh measures to deter hoarding of iron ore in a bid to cool a surge in prices of the key steel-making material.
Beijing authorities are urging trading companies that store iron ore in big volumes at ports to sell some of their material, according to people with knowledge of the issue, who asked not to be named because the information is private. They’re also considering raising port-storage fees for large-volume cargoes, they said.
The moves mark the latest efforts by China to head off fresh commodity inflation as the economy rebounds from the growth-sapping Covid restrictions it abandoned at the end last year. Beijing has long sought ways of gaining more sway in iron ore, where it’s highly reliant on imports from a small number of global mining firms.
Iron ore erased gains on news of the measures before partially recovering. It was trading 0.6% higher at $128.35 a ton in Singapore as of 3:51 p.m. local time. It rose as much as 2.4% earlier in the session.
The rally in iron ore prices of more than 50% since October has already seen Dalian Commodity Exchange trigger a risk warning and impose a position cap on futures contracts to tackle speculation. The government last year also created a new state-owned firm — China Mineral Resources Group — to purchase imports on behalf of the country’s biggest steel mills in a bid to boost negotiating power.
Last week, the National Development and Reform Commission, the top economic planner, held meetings with industry experts to discuss ways to curb “overly fast” price gains. It has been continuing talks with various companies on the iron ore price controls this week, the people with knowledge of the issue said.
The NDRC has taken on a key role in monitoring — and trying to cool — price surges in markets from coal to soybeans, as well as iron ore. In January, it summoned a group of traders and asked them to provide details of their businesses after prices of the steel-making material surged.
Despite recent measures and warnings, iron ore prices are still near an eight-month high, after Chinese steel output rebounded amid accelerating manufacturing activities.
The NDRC didn’t immediately respond to a fax seeking comment.