Iron ore futures plunge again
Iron ore futures plunged for the second day in a row as Chinese authorities stepped up attempts to control the surging price of raw material.
Iron ore futures plunged for the second day in a row as Chinese authorities stepped up attempts to control the surging price of raw material, amid an infrastructure boom in the country.
Futures traded on the Singapore exchange were down 6.5 per cent on Friday night, tumbling back below $US200 a tonne to $US197.05 a tonne at 1700 AEST, after an 8.5 per cent fall on Thursday.
The most active contract traded on China’s Dalian exchange was down 7.5 per cent to CNY1173 at the same time, as authorities in China’s biggest steelmaking district warned steel mills against price manipulation and spreading rumours of price hikes.
According to reports by Bloomberg on Friday, the local government of Tangshan – China’s biggest steel making hub, worth 14 per cent of national production – warned local mills against illegal price manipulation or fabricating or spreading information about price increases, saying violations could lead to suspension of business licenses.
Iron ore futures traded in Singapore have now fallen more than 15 per cent since hitting a record $US233.75 a tonne on Wednesday.
Analysts with ship-broker Braemar said tumbling futures markets could be a sign the iron ore rally has run out of steam, but said they expected volatility on commodity markets to continue in the short term.
“With prices at such lofty heights, many are questioning how much more steam the rally has, or whether this represents a broader cyclical recovery,” Braemar said in a note on Friday.
“While we can’t rule out prices taking further legs upwards in this choppy market, we believe that they will begin to soften through the second half of this year as some of the supply bottlenecks ease. China’s gradual withdrawal of fiscal support is also likely to weigh on industrial demand for raw materials.”
Tumbling iron ore futures also hit major resources stocks traded on the local exchange, with BHP down 78c or 1.55 per cent to close at $49.57, off from a high of $81.82 on May 10.
Rio Tinto shares closed down $2.57, or 2 per cent, at $125.43, with Fortescue Metals Group down 65c, or 2.8 per cent, at $22.79 on Friday.