Iron Ore Prices, Which Surged Due to China Crackdown, Show Signs of Stabilizing

Experts Say Strong Demand Will Continue to Drive Growth

[Asia Economy Reporter Yujin Cho] As Chinese authorities strengthen control over iron ore production, the iron ore prices, which had surged to record highs, are showing signs of stabilization.

According to Bloomberg News and others, on the 14th, the September delivery iron ore futures price at the Dalian Commodity Exchange in China fell to $187.10 per ton. This represents an 11% drop from the intraday trading low and nearly a 20% plunge compared to the previous day's record high of $233.75.

The news agency assessed that the decline in iron ore prices was driven by a shift in the Chinese government's policy stance in response to the sharp rise in raw material prices. Recently, iron ore prices had risen to record highs due to speculative trading related to inflation and excess demand in anticipation of production cuts.

Authorities in Tangshan City, which accounts for 14% of China's total steel production, summoned steel industry companies based in Tangshan along with the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) on the same day, warning that violations including price manipulation would be punished.

This contrasts with last month's remarks from the NDRC, the National Bureau of Statistics, and other related departments, which stated that the rise in raw material prices was due to market changes and was not a situation to be overly concerned about.

Wang Yan, an analyst at Shanghai East Asia Futures, said, "The Chinese government's control over iron ore prices is becoming stricter," adding, "Since Premier Li Keqiang ordered effective measures to curb excessive rises in raw material prices at the State Council executive meeting on the 12th, the downward trend in iron ore prices has continued."

Several factors have been cited for the recent strength in iron ore prices, including the global economic recovery and excess demand driven by China's air pollution policies.

Despite Chinese government controls, experts believe that demand from regions outside China continues, so price increases are expected to persist for some time.

Market participants in China reported that while some steel mills have stopped purchasing due to high price burdens, some traders are sweeping up goods in the spot market.

Andrew Glass, founder of Avatar Commodity, said, "Although iron ore prices have surged in recent days, the strong demand means that the steel industry's solid margins will continue for some time."