China to ensure ferrous market stability, sees factory-gate price growth easing in H2

  • PPI growth is expected to slow in H2
  • Commodity prices will return to taking cues from fundamentals
  • China encourages companies to expand domestic, overseas iron ore resources

BEIJING, May 18 (Reuters) - China's state planner said on Tuesday it would take measures to stabilise steel and iron ore market, and that it expects growth in the country's factory gate prices to ease in the second half as commodity prices return to taking cues from fundamentals.

Pandemic-driven stimulus measures have driven up commodity prices recently, boosting profitability for upstream companies but hurting downstream manufacturers' performance, Jin Xiandong, spokesman for the National Development and Reform Commission (NDRC), said at an online briefing.

China's producer price index (PPI) expanded at the fastest pace in more than three years in April, fuelled by a sharp jump in ferrous metals, oil and others. read more

"Affected by global prices and lower year-ago bases, PPI growth could further expand in coming few months," Jin said.

But PPI is expected to cool in the second half with commodity prices "gradually back to the supply and demand fundamentals", Jin added.

The state planner said it was working together with the market regulator to look into the steel and iron ore market, where prices have soared 30-40% in 2021.

Regulators in Shanghai and steel hub Tangshan warned local mills last week against price gouging, collusion and irregularities, and said they would shut down business at those seriously disrupting market orders. read more

To ensure iron ore supplies, the key steelmaking ingredient for which China relies heavily on imports, the NDRC said China would step up domestic mines exploration and development of existing projects.

China also encourages companies to "actively and prudently" develop overseas iron ore mines while expanding import channels, Jin said.

Benchmark iron ore futures on the Dalian Commodity Exchange jumped 3.4% to 1,232 yuan ($191.69) a tonne on Tuesday morning trade.

($1 = 6.4271 Chinese yuan)

Reporting by Min Zhang, Stella Qiu and Shivani Singh; Editing by Jacqueline Wong

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