Iron ore prices have been tumultuous this week – soaring past US$80 a tonne, then slumping, before rising once more.
Iron ore peaked on Monday, reaching US$80.83 a tonne – the first time it has been above this point since 2014. This also saw a rise in steel futures, by more than six per cent, and an increase in zinc and lead prices, enhanced by China’s infrastructure and property investment push.
However, the upward movement was short-lived, as iron ore dropped 6.8 per cent to US$72.08 a tonne on Wednesday, according to The Metal Bulletin.
Iron ore futures also dropped around eight per cent to 556 yuan ($108) while coking coal dropped nine per cent to 1282 yuan ($250), mining.com reports. In addition, steel futures also met with a 6.7 per cent drop.
Despite being the world’s largest steel producer, China’s steel industry is suffering from overcapacity and lowered profits. Beijing recently released a new five-year plan aiming to slash steel capacity by up to 150 million tonnes by 2020 in an effort to raise profits, as well as minimise pollution.
Currently, iron ore to be sent to China’s Qingdao port increased 8.7 per cent to $US78.36 a tonne, Reuters reports, with steel and iron ore futures also receiving a boost.
Director of macroeconomic analysis at CEBM Group, Zhong Zhengsheng, suggested a possible slump in China’s property market next year, which could hamper the economy.
“The Chinese economy continued to improve in November, although it lost some momentum compared to the previous month. Inventory and employment data also showed the foundation of growth is not solid yet and investors have to remain vigilant about the risk of a downturn in coming months,” he said.