Sharp Rise in Iron Ore Prices Due to Infrastructure Investment in China

Balgae Committee summons iron ore companies, warns of severe punishment for price manipulation
International iron ore and steel prices inevitably affected as China infrastructure investment accelerates

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Chinese authorities have stepped in to control iron ore prices as they showed abnormal signs. Since announcing large-scale infrastructure investments as part of economic stimulus measures, Chinese authorities suspect that some speculative forces in the iron ore market are influencing prices.

Photo by Global Times Capture

According to Chinese media such as Pengpai on the 10th, the National Development and Reform Commission (NDRC) and the State Administration for Market Regulation summoned iron ore-related companies the day before to warn them about recent fluctuations in iron ore prices. The two departments stated that they are closely monitoring iron ore price changes and will impose severe penalties if prices are raised through price manipulation or the spread of false information.

Ma Liang, chief researcher at Guotai Jinan Steel, commented on the moves by the NDRC and other Chinese authorities, saying, "Despite the authorities expressing their stance on iron ore price fluctuations at the end of last month, prices have continued to rise," and predicted, "The policy pressure from the authorities will increase further."

Pengpai added that Chinese iron ore prices have been stirring since November last year, with a sharp rise starting in February. As of the 8th, the spot price of iron ore was $149.95 per ton, more than 25% higher than the $119.5 per ton at the beginning of the year. Futures prices also traded at 841 yuan per ton, up 23.6% compared to the start of the year.

Pengpai analyzed, citing experts, that factors such as steel companies, which were under control due to power shortages in the fourth quarter of last year, resuming steel production this year, and expectations for large-scale infrastructure investments by the Chinese government have contributed to the rise in iron ore prices since the beginning of the year.

Chief researcher Ma said, "Current iron ore port inventory has reached 157 million tons, the highest since June 2018," and diagnosed, "From a fundamental perspective, there is no supply-demand problem, and due to regulatory pressure from the authorities, iron ore prices are likely to show downward tendencies."

Iron ore forecasting institutions such as China Huatai Futures stated that although steel production at Chinese steel mills has rapidly recovered since the end of December last year, demand is not strong enough to significantly affect iron ore prices. Given the strong policy will of the authorities, they forecast that the rise in iron ore prices will be limited. Pengpai reported that iron ore prices fell more than 5% after the NDRC's warning became known to the market the day before.

After the Chinese leadership announced large-scale infrastructure investments as part of economic stimulus measures, a sentiment formed in the market that steel demand would inevitably increase. Since China's steel demand also affects international iron ore prices, Chinese steel-related companies are closely monitoring trends in raw material prices such as iron ore.

This content was produced with the assistance of AI translation services.