Raw material prices reached $100.7/t on Friday

The cost of September futures for iron ore on the Dalian Commodity Exchange for the week of July 15-22 increased by 5.58%, to 681 yuan/t ($100.7/t at the NBU rate on 07/22/2022).

At the same time, as stock chart shows, the cost of raw materials from Tuesday began to decline and fluctuated between 657-665 yuan/ton. However, at the end of the week prices could even cross the $100/t mark.

The increase in the cost of iron ore is due to government intervention in the real estate sector. Earlier this week, China’s government regulators urged banks to lend to qualified real estate projects and meet developers’ financing needs.

Last week, Chinese real estate giant Evergrande Group received the first refusal from creditors regarding the extension of the term of payments on bonds, which caused a slight panic in the market.

Also during the week, the Chinese government established the China Mineral Resources Group, a company that will carry out centralized procurement. The new organization intends to engage in investment activities, imports, exploration and mining.

The steel companies of China in January-June 2022 reduced production of crude steel by 6.5% compared to the same period in 2021, to 526.9 thousand tons. Import of ore in the first half of the year decreased by 4.4%.

China is the largest steel producer in the world. At the end of 2021 Chinese steelmakers reduced steel production by 3% compared to 2020, to 1.03 billion tons.