Iron ore falls after crackdown plea from China mills

Singapore

IRON ore futures in Singapore tumbled from the highest since 2013 after a leading mills' group in China stepped up its push for the authorities to investigate the raw material's blistering rally.

The China Iron & Steel Association (CISA) called on the State Administration of Market Regulation and the China Securities Regulatory Commission to crack down on potential illegal activities, according to a Dec 11 statement. That followed similar remarks in a recent interview carried by the Xinhua News Agency, as well as a call for rational trading from the Dalian Commodity Exchange.

Iron ore has surged in the final quarter as robust demand coincided with supply difficulties in Brazil and bad weather in Australia prompted a brief closure of top hub Port Hedland. Highlighting the tightness, inventories at China's ports have dropped for the past four weeks. While the jump in prices has brought a windfall for miners including BHP Group, Rio Tinto Group and Fortescue Metals Group Ltd, it's raised mills' costs, spurring a push-back.

"A recent reduction in overall iron ore exports comes at a time where ex-China demand is steadily recovering," Everbright Futures analyst Shi Feng said in a note. Still, Mr Shi also cautioned that there's now a rising risk of policy intervention and that it may not be advisable to keep "chasing new highs".

In response to queries from Bloomberg, Fortescue chief executive officer Elizabeth Gaines said the miner has a "strong and positive relationship" with CISA, including meetings and communication on matters of mutual interest. "As a low-cost supplier of seaborne iron ore to China, our well-established marketing strategy is centred on the long-term needs of our customers," Ms Gaines said. Rio declined to comment, and BHP didn't immediately reply.

Futures tumbled as much as 4.5 per cent to US$150.71 a ton on the Singapore Exchange and traded at US$150.85 at 3.25pm, eroding last week's 13 per cent surge. The iron ore contract in Dalian closed 2.4 per cent lower, while hot-rolled coil and rebar declined in Shanghai. Benchmark iron ore spot ore hit US$159.95 a ton last Friday, the highest since 2011, according to Mysteel Global. BLOOMBERG