Iron ore futures slipped from previous rally, after state authority urged for more transparency in price discovery for the raw material.
The futures of Dalian Commodity Exchange (DCE) for May delivery then plunged down by 5.90% day-on-day or down RMB 49 to RMB 781/mt, during the day trading session on Wednesday.
The rebar futures also went down by 1.26% or up RMB 62 to RMB 4,843/mt, during the day trading session.
China regulators seek to punish against any false prices reporting
The country’s National Development and Reform Commission (NDRC) and the State Administration for Market Regulation had warned on Wednesday regarding market speculators fabricating higher iron ore prices for market manipulation.
The warning was the second time this year, as state regulators pushed for more market stability in the commodity trading to ensure better transparency and accuracy for price information.
As Chinese authorities hoped to calm down rising iron ore prices led by market speculation of post Lunar New year demand that drove the benchmark iron ore futures on the Dalian Commodity Exchange to over a five-month high on Tuesday, achieving gains of over 20% since the start of the year.
The regulators highlighted that there were still plenty of domestic inventories that were being recorded at multi-year highs, which should ease prices instead of being fueled by pure market speculations.
Steel production keep in check by anti-pollution measures
The return of Chinese trade participants had improved market demand on raw materials, though there were still environmental anti-pollution measures being implemented that placed restriction on steel output.
However, many trade participants viewed these measures as temporary with relation to the Winter Olympics to improve overall air quality for the near term.
Though, there were market concerns over possible tighter shipments from Brazil due to rainy weather, while Australian supplies were affected by wet weather and labor shortage from the covid restriction measures.
However, trade sources cited that the supplies were still adequate, while demand is warming gradually after a long holidays break for the Chinese participants.