Iron ore collapses 6.2% after China mills urge probe into rally
SINGAPORE: Most-active iron ore futures fell much as -6.2% to US$107.20 a tonne on Singapore Exchange and trades -5.2% at US$108.33 at 1.48pm on Friday.
At 3.50pm, it was off the earlier low and it was trading at US$845, down US$36 or 4.09%.
China’s top iron ore industry group has urged the government to maintain order in the market after prices surged to a five-year highon Monday, prompting warnings that the rally can’t be sustained.
The China Iron & Steel Association "is reporting relevant problems in the industry to government ministries and regulators, urging a stronger investigation and supervision to maintain normal iron ore market order,” Vice Chairwoman Qu Xiuli said at a conference in Shanghai on Friday. The group wants to see prices back at "reasonable levels,” she said.
Iron ore has surged to more than US$120 a ton after a dam disaster in Brazil and bad weather in Australia curtailed shipments just as China’s mills ramp up steel output. CRU Group warned this week that prices are disconnected from fundamentals as supply is improving and steel consumption is set to soften.
The surge in prices can’t be sustained as "there is no issue with supply,” Qu said, citing recovering output in Brazil and a rise in Chinese domestic output. Speculation may have also helped drive the rally, she said. The iron ore market may move to a surplus this half as Chinese steel output growth slows, according to Qu. - Bloomberg
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