Singapore iron ore futures experienced a rebound on Tuesday afternoon, gaining 2.1 per cent to reach $US102.95 per tonne by 3.20pm AEST. This recovery follows an overnight dip where futures for the active contract fell by 2.6 per cent to $US100.65 per tonne. The initial decline occurred amidst renewed efforts by Chinese authorities to regulate capacity within heavy industries, including steel production. The fluctuations reflect ongoing market sensitivity to regulatory actions and demand expectations.
The recent volatility in iron ore prices is attributed to increased scrutiny of traders by Beijing, as well as a broader clampdown on price fluctuations across several key commodity futures markets. These include coking coal, lithium, and polysilicon. These government interventions are designed to stabilise commodity prices and prevent excessive speculation.
According to Commonwealth Bank mining analyst Vivek Dhar, the recent pullback in iron ore prices highlights limitations to demand optimism. This includes the impact of China’s 1.2 trillion yuan hydropower project in Tibet. CBA anticipates a further decline in iron ore prices, forecasting a drop to $US95 per tonne by the end of the year. They have indicated that further downside pressure could occur if steel output contracts more sharply than expected.
