Iron ore prices dropped on Thursday following China attempted stricter oversight of commodity markets to control exorbitant prices.
Benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were trading hands for $211.85 a tonne, below 2%, as stated by Fastmarkets MB.
September iron ore on the Dalian Commodity Exchange closed daytime trading 5.7% below at 1,142.50 yuan ($177.40) a tonne, after earlier scoring a three-week low of 1,102 yuan.
Rebar on the Shanghai Futures Exchange dropped by 4.7%, and the hot-rolled coil fell 4.5%, while stainless steel collapsed at the same rate of 2.8%. Dalian coking coal plunged 8%, and coke failed 4.8%.
The world’s largest steel product producer has boosted consumption of iron ore and other steel ingredients while ramping up production for application in producing home appliances and construction materials between robust demand driven by global stimulus measures.
On Wednesday, China’s cabinet pledged to increase its commodity supply management and demand to control unreasonable price hikes and protect consumers.
Commodity prices have come under stress overnight amidst the more comprehensive risk-off sentiment. As China’s State Council informed about commodity prices, Tapas Strickland, Sydney-based economist for National Australia Bank, reported Reuters.
However, the pullback in commodity prices overnight demands to be discussed in the context of the sharp run-up this year.
Richard Lu, the senior analyst at commodity consultant CRU Group’s Beijing office, told the skyrocketing steel prices will shock some consumers at some point.
The commodities bull run is not finished yet, Eric Liu, head of trading at Chinese copper trader ASK Resources Ltd., informed Bloomberg.
Every country is wrestling with increasing inflation, but as long as they don’t contract monetary and fiscal policies, commodity prices can hardly cool off.
For the time being, global commodity demand signs are still burning on all cylinders. With the current weakening still compatible with noise, TD Securities analysts headed by Bart Melek stated in a note. But the context points to the dangers of normalizing growth.