Iron Ore’s Sharp Gains Catch Beijing’s Eye as Traders Summoned
(Bloomberg) — China’s top economic planning body has summoned a group of iron ore traders and asked them to provide details of recent business, a sign that authorities want to head off fresh commodity inflation as the economy rebounds.
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According to sources, at least five domestic ironore traders and brokerages will meet Tuesday with officials of the National Development and Reform Commission in order to discuss the market. The NDRC requested the firms’ recent trading records for physical and futures markets ahead of the talks, said the people, who asked not to be identified as the information is private.
Iron ore futures rose almost 60% between the end of October and last Friday. They then fell Monday due to fears that authorities would not take action to stop the rally. The steel-making material has surged on hopes that infrastructure and construction activity will rebound this year as China’s economy expands faster.
The summons from the NDRC’s Department of Price echoes previous drives to rein in iron ore, including in the first half of last year when soaring global commodity prices fueled concerns over inflation. The department 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.
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China takes about 70% of the world’s iron ore exports, and the commodity is highly sensitive to expectations for government-backed stimulus. Since President Xi Jinping’s abandonment of Covid Zero by President Xi Jinping, economists have rushed for better forecasts for Chinese growth. Meanwhile, other raw materials are also gaining. Copper reached $9,000 per ton for the first-time since June. Shares in BHP Group, a top global miner, also hit new records on Monday.
The NDRC didn’t immediately respond to a faxed request for comment.
According to the official Securities Daily, plans for a Tuesday meeting of the NDRC were announced earlier Monday. The agency made public a warning about falsified market information on Sunday and pledged additional measures if necessary in order to stabilize prices.
On Guard
China 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. Last year, the government 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.
Inflation is expected to stay mild this year, Zou Lan, head of the monetary policy department at the People’s Bank of China, said at a briefing last week. But he added that authorities “must not let our guard down” as prices could rise on rapid money-supply growth, the release of pent-up consumption and imported inflation.
In the first week of 2023, the NDRC said it was “highly concerned” about iron ore’s moves and would tighten supervision of the market. Citigroup Inc. stated in a Jan. 4, note that iron ore was being traded like a financial asset, and that futures prices had outperformed fundamentals.
Fran Wang provided assistance.
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