As Beijing cranked up measures to tamper overheating prices, iron ore values in Singapore fell 13% in mid-February. BloombergQuint reported that on Feb. 15, by 4:16 p.m. local time, futures on the Singapore Exchange slumped 8.8% at $134.05 a ton. Likewise, China’s Dalian Commodity Exchange prices dropped to their daily limit of 10%.

The drop came after Chinese regulators ramped up actions the previous week when iron ore prices rose by more than 60%, surpassing $150 a ton since mid-November last year.

Beijing has issued port inspections, increased futures trading fees, and sent warnings about inaccurate data reports. Multiple iron ore companies were also warned against speculation and hoarding at a meeting with regulators in Beijing.
Chinese authorities also promised scrutiny and discipline if companies violated their warnings.

However, experts are worried the regulatory clampdown would only bring about short-term effects.

Atilla Widnell, managing director at Navigate Commodities, told BloombergQuint, “History has taught us that these sharp plunges after Chinese rhetoric on investigating and supervising iron ore prices are short and temporary.” In addition, Widnell said a drop in supply from Australia and Brazil and growing steel output had caused a very tightly balanced market.

Wei Ying, an analyst with China Industrial Futures, said, “The government’s rhetoric on cracking down on iron ore prices is expected to drive trading for the near term as the market awaits more specific measures.”

Mike Henry, Chief Executive Officer of BHP, the No.3 global iron ore supplier, viewed that eventually, pricing was down to supply and demand. “At the end of the day, the iron ore price will be determined by supply and demand. Given the strong outlook we see on the demand side, plus some of the supply-side constraints, we think that will provide a measure of support to pricing.”

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