Bull run in metals stokes inflation fear
Iron ore futures surged more than 10 per cent and copper jumped to a record amid growing bets they’ll be among the biggest winners from a commodities boom that’s stoking concerns about inflation around the world.
Steel prices rose 6 per cent to hit a trading limit in China, while iron ore futures in Singapore jumped 10.3 per cent to a record above $226 a tonne, extending this year’s gain to about 40 per cent.
While market participants struggled to pinpoint a trigger for Monday’s gains in iron ore, they cited several ongoing trends, including optimism that central banks will retain supportive policies even as the global economy recovers.
Expectations that China will tighten environmental rules have added to the bull case for copper — seen as vital to the green energy transition — and fuelled speculation that steelmakers may front-load iron ore purchases before
new curbs kick in.
China announced a series of measures on Friday to tighten controls on steel capacity, in an effort to curb pollution in key areas as well as reduce “blind investments and disorderly constructions”.
The most active iron ore futures contract on the Dalian Commodity Exchange, for September delivery, soared to an all-time high of 1,326 yuan ($206.20) per tonne.
“The surge of iron ore and steel prices were mostly boosted by speculative trading,” Tianfeng Futures analyst Wu Shiping said.
While some steel mills have stopped buying materials at such high prices, traders are sweeping goods at spot market, Wu added.
Meanwhile, reports suggest that NMDC is all set to raise iron ore prices by up to Rs 500 per tonne for May, on the back of the global uptrend. Panel will to meet in 2-3 days to decide on the extent of the increase.
A spike in world steel prices has enabled Jindal Steel and Power Ltd (JSPL) to make a prepayment of Rs 2,462 crore to its term lenders as its aims to become a net debt-free firm.
The JSPL share price touched a 52-week high of Rs 501.60 on Monday, rising more than 4 per cent intraday after the company announced the prepayment to the stock markets.
In its regulatory filing, JSPL said it has reduced its debt by more than Rs 20,000 crore from a peak of approximately Rs 46,500 crore in the third quarter of 2016-17 to Rs 25,600 crore in the third quarter of the last fiscal.
The reduction of Rs 2,462 crore is over and above the annual committed debt reduction in the financial year 2020-2021, the company said.