Chinese steel and iron-ore prices: another year, another bubble
Launceston, Australia — The new year has started with something familiar: a bubble in Chinese iron-ore and steel prices. The most-traded iron-ore contract on the Dalian Commodity Exchange leapt as much as 8% on Monday, hitting a three-year high of 657.5 yuan ($95.29) a tonne. Its gain in the year just begun is about 18% and the contract is four times higher than the low in July 2015. It’s much the same story with Shanghai steel rebar, the benchmark construction grade, which gained 5.2% on Monday and is up about 16% since the start of the year. Strong rallies so far this month appear to owe more to sentiment than actual demand and supply fundamentals, which raises the possibility of a repeat of last year’s medicine, tighter controls on commodity trading. Main driver for steel’s surge is the Chinese government’s intention to keep closing excess capacity in polluting heavy industries, such as steel, iron ore and coal. China wants big state-owned businesses to cut steel production by 6-...
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