Meltdown in iron ore markets

THE iron ore market was hit hard in the past few months due to a combination of factors.

Firstly, China's government started taking action a few months ago to rein in iron ore prices after they rose to US$230/MT in May this year (as seen by the rolling second contract month of SGX iron ore futures).

Compared to July 2020 when it was trading below US$100/MT, this translated to a rally of more than 100 per cent in just one year. The high iron ore price was part of a broader commodity rally that caused producer price inflation to surge in China, pushing it to its highest level in August since 2008. This has hurt many small and medium-sized businesses as it resulted in higher raw material costs for them.