Fresh off the presses this morning comes this from Bloomie:
A recent surge in iron ore prices was caused by changes in demand, market speculation and “unreasonable” pricing methods, China’s top planning body said.
Chinese steelmakers re-stocked iron ore during the traditional “winter reserve” period and ramped up purchases as confidence in the economy improved, leading to an explosive increase in demand in the short term, the National Development and Reform Commission said in a statement on its website.
The three largest mining companies and certain traders either delayed or controlled deliveries to make up for their previous losses, creating a false impression of temporary short supply, according to the statement. Some mining companies also bought iron ore from the market drive up prices, it said.
Major mining companies based long-term contract prices on “opaque” bidding, pushing prices up even as a very small amount of ore was traded, according to the statement.
The three largest iron-ore suppliers, not identified by name in the statement, didn’t respond to questions about the NDRC’s statements. A Rio Tinto Group official in London declined to comment. A spokesman for BHP Billiton Ltd. couldn’t immediately be reached. Vale SA declined to comment on the NDRC statement in an e-mailed reply to questions.
China imported 70.9 million metric tons of iron ore in December, a record high for a single month, the planning body said.
It will be fascinating to watch whether it will suddenly be the Chinese that become enthusiastic about exchange traded iron ore pricing. As the market moves into oversupply why wouldn’t they? Marius Klopper’s breaking of the contract system may yet be seen by history as an own goal.
