NDRC: China prioritizes stabilizing commodity supplies, prices

In laying out its plan of work for the current year, China's National Development and Reform Commission (NDRC) - the country's powerful state-planning agency - has said that in order to lower the production costs of enterprises, all related government authorities should work on stabilizing the supply and prices of energy commodities and crucial raw materials including coal and mineral resources.

In a post on its website on June 13, NDRC pledged to employ "all effective measures" to reduce costs among Chinese enterprises so as to improve their overall economic performance and build up confidence among market participants.

Among all the measures being considered, safeguarding the stability of key industrial raw materials markets is vital, and goals such as the implementation of a zero-tariff policy on coal imports should be maintained, it said.

As for increasing the self-supply of bulk commodities, China should strengthen its ability to explore and develop important energy and mineral resources to increase both their storage and production, NDRC stated, adding that the supervision of bulk commodities markets will be strengthened to ensure market stability.

The Commission tabled its work plan for this year several days after new data released by the country's National Bureau of Statistics showed that during January-April, profits among China's sizable industrial firms had plunged by 20.6% on year.

Specifically, profits among the country's ferrous mining and processing sector slumped by 42.8% on year during the first four months of this year, while firms in the steelmaking and processing sector suffered an even larger fall in their profits of a shocking 99.4%, the NBS data showed.

Since late last year, the profit margins enjoyed by Chinese steelmakers have been impacted by tepid steel consumption among end-users (due to the country's property crisis) and the fluctuating prices of key steelmaking raw materials, as Mysteel Global has reported.

Recently, though domestic blast furnace mills have been able to enjoy some profits on finished steel sales after the makers succeeded in lowering their procurement costs on crucial inputs such as coke, prices of imported iron ore have strengthened during the past few days, preventing the mills from thoroughly enjoying a reversal of fortunes, Mysteel Global noted.

For example, Mysteel SEADEX 62% Australian Fines reached $113.55/dmt CFR Qingdao on June 13, climbing by a total of $15.35/dmt from May 25. In the derivative market as well, the most-traded iron ore futures contract on the Dalian Commodity Exchange had experienced seven straight working days of rises over June 1-9.

The issue of price stability in China's iron ore markets is a major one for the NDRC, which in the past has warned industry players that it was collecting "feedback and suggestions" to help strengthen supervision of the cuntry's spot and derivatives markets for iron ore, and to crack down on illegal operations such as hoarding, price gouging, "malicious" speculation, and the fabricating and spreading of information about price hikes.

Early this year NDRC had held discussions with related iron ore price information providers, reminding them to ensure the accuracy of their releases assessing iron ore prices, and warning them not fabricate or publish any false price information that might contribute to driving up prices, as reported.

The ore price rises over the past week or so reflected market expectations that Beijing would introduce broad stimulus measures to shore up domestic consumption and the property market, Mysteel Global noted. The prices of imported ore seemed to act more sensitive to the bullish sentiment than those of other ferrous commodities, due to its current healthy market fundamentals.

Written by Lea Li, liye@mysteel.com

Edited by Zhenqi Yang, yangzhenqi@mysteel.com

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.