Iron ore prices have tumbled as Beijing has suppressed demand and cracked down on its domestic steel production.
The key steel ingredient plummeted from near-record high prices of US$220 a tonne in July to US$140 last week, reaching its lowest value since December of last year.
To achieve this, Beijing has cut demand for iron ore and shrank production over the last six months, slapping its steel exports with two separate price hikes whilst simultaneously lowering the cost of imports.
The world’s largest steelmaker, state-owned Baowu, claimed that the plans to lower steel output fell in accordance with China’s emissions reduction targets.
“This is a political issue with no room for bargaining, and it must be resolutely implemented,” Baowu Chairman Chen Derong said, reported Reuters.
But a political analyst at Curtin University and author of 54 books on communist systems, Joseph Siracusa, believes Beijing’s top economic planner—the National Development and Reform Commission (NDRC)—had little intention in meeting climate change commitments.
“The NDRC would not hesitate to use the narrative of emissions reduction as a convenient cover-up, mainly because the CCP (Chinese Communist Party) has no real interest in pursuing Paris Climate Accord targets at the expense of the national plan,” Siracusa told The Epoch Times.
Instead, amid falling iron ore—and subsequently steel—prices, Siracusa pointed out that the CCP had prioritised the continued development of its own domestic steel—much of which was sourced from Australia.
“Beijing is fully utilising Australia’s iron ore for its steel use in infrastructure as well as military—wherever top-grade steel is required,” Siracusa said.
Siracusa suggested that the CCP would be willing to slam its local steel mills for raising iron ore prices and hampering the development of Beijing’s priority sectors—such as its military.
“They’re lowering production right now as a punishment to the local industries ... because if they’re going to jack up the price of steel, then those missiles cost more money, buildings cost more money, rockets cost more money,” Siracusa said.
High-grade steel, Siracusa noted, is commonly used in submarines, planes, ships, rockets, and ballistic missiles. And in 2020, China’s navy size eclipsed that of the United States.
But Beijing’s plan to thwart skyrocketing iron ore prices began much earlier after the resource reached an all-time high of $230 a tonne on May 12.
The NDRC, along with four more of the state’s developmental departments, echoed in a public statement that the CCP had “attached great importance” to stabilising commodity prices.
The NDRC accused China’s steel industry of “colluding with each other to manipulate market prices and establish monopolies,” “fabricating and spreading information about price increases,” and hoarding.
At that point, the NDRC warned the CCP had a “zero tolerance” for such activities, threatening to investigate steel mills by “continuing to increase law enforcement inspections” and subsequently punishing offenders.
After the crackdown, global iron ore prices immediately fell, reaching $180 a tonne on May 26.
But the effect of the intervention was seemingly short-lived, with global iron ore prices surging again in June and hovering at around $220 for over a month up until Beijing announced its plans to limit total steel production.
