China chooses speculators to halt commodity boom

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China trade agreement, commodities

China moved up its fight versus rising commodities prices, gathering top executives to a conference that warned severe punishment for violations varying from excessive consideration to publishing fake news.

The government will give zero tolerance for monopoly practice and hoarding. The National Development and Reform Commission stated that top metal producers were invited to a meeting in Beijing with various government departments on Sunday.

The pressure to rein in rising metals prices waved over markets — with steel dropping as substantial as 6% and iron ore falling by adjacent to the daily limit — before prices steadied succeeding in the session. Most base metals were also under stress.

With policy risk-shifting to government intervention, prices will undoubtedly be influenced by market sentiment, stated Li Ye, an analyst at Shenyin Wanguo Futures Co. in Shanghai. The fast surge in commodity prices has severely hit manufacturers and market orders, pointing to losses and defaults.

There’s been a constant drumbeat of government notices about the consequences of commodity prices near the most distinguished level in nearly a decade.

But apart from changes to trading rules at futures exchanges, there hasn’t been enough action. Beijing is expected to meet possible depletion of policy options to hold the rally, Citigroup Inc. announced in a note.

The advice from the NDRC comes as a significant flood in commodities prices combustibles fears that more active inflation could depress economic growth in China and beyond. Investors have been gathering into industrial metals on bets that the world will bounce strongly from the epidemic.

However, worries regarding the knock-on influence on demand are growing as manufacturers must develop finished goods.

It might not be excellent for the speculative community. However, it’s excellent news for the world in general. Amelia Xiao Fu, head of global commodities strategy at BOCI Global Commodities Ltd., spoke by phone from London. She thinks prices could become more relaxed, and the room for extreme rallies may be restricted.

In targeting commodity prices, authorities are struggling with trends that they only partly control as the world economy reboots with supply chains developed. The government is also taking the results of its attempts to decrease greenhouse gas emissions, adding to price gains.

 

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