A volatile month for iron ore and steel
rolled on as China stepped up its rhetoric around curbing output and pollution
in one of its dirtiest industries.
China’s Ministry of Industry and
Information Technology will seek to establish a mechanism to contain steel
output based on carbon emissions, pollutant discharges and energy consumption,
the Shanghai Securities News reported, citing ministry official Lyu Guixin.
Iron ore climbed more than 6% in Singapore, while steel futures in Shanghai
jumped.
Iron ore has whipsawed this month as
surging steel demand and tight raw material supply sent prices to a record two
weeks ago. They’ve since plunged, entering a bear market this week, as China
sought to cool a furious commodities rally that’s stoking concerns about
inflation. Volatility for Singapore futures spiked to the highest in more than
four years.
“The
new policies will focus on cutting output instead of capacity, which will be
more likely to see output cuts happening eventually,” said Lu Li, an analyst
with Shenhua Futures Co. There’s still a question on when the policies will be
implemented, which may not be in the short term given the rapid surge in prices
already, Lu said.
Iron ore on the Singapore Exchange jumped
as much as 6.7% to $183.90 a ton and was at $183.25 by 2:31 p.m. local time.
Prices dropped 5.7% on Wednesday, taking losses from the record reached earlier
this month to more than 20%. Futures in Dalian surged 5.9%, while rebar and
hot-rolled coil in Shanghai rose more than 3%.
The world’s top steel consumer and
producer has frequently reiterated its commitment to curb record output since
late last year, rolling out a series of production restrictions to reduce
emissions and targeting speculators and hoarders. Still, the country’s mills
are churning out unprecedented volumes of steel as robust profit margins enable
them to accommodate higher input costs.
China is fully capable of meeting
domestic steel demand between 2021 and 2025 by adjusting imports and exports,
Shanghai Securities News reported, citing comments made by Lyu at a forum.
Bloomberg News