China is investigating the cause of a steep rise in imported iron ore prices in an effort to “crack down on abnormal behavior,” said Qu Xiuli, the deputy chair of China’s Iron and Steel Association, which is causing prices for the steelmaking ingredient to tumble, reported the Financial Times.
Qu told a conference in Shanghai that departments were looking into the recent jump in prices. “The drop in steel prices and the rise in iron ore prices have meant that the level of [Chinese] steel company profits has continuously declined and become hard for companies to digest,” Qu said.
China is the world’s largest steel producer and news of the probe sent iron ore prices in China down 4% and also hit shares of the world’s largest miners, Rio Tinto and BHP Billiton. Prices for iron ore surged to a five-year high of more than $126 a ton this week amid a recovery in Chinese steel demand and lower supply from Brazil and Australia. On Friday, they fell to $114 a ton, according to Platts.
Colin Hamilton, an analyst at BMO Capital Markets in London, said “They’re sending a warning sign to financial markets that they don’t want to see some of the aggressive moves continue.”