Beijing has launched a review into record prices for key steelmaking ingredient iron ore, opening another front in its campaign to suppress high commodities prices.

In a statement issued on Monday, the National Development and Reform Commission, China’s top economic planning agency, said it would investigate “malicious speculation” in the iron ore market and “severely punish” any wrongdoing.

The move marks the latest step by Chinese policymakers to cool soaring commodity markets, which have pushed up factory gate prices in China to their highest since the 2008 financial crisis and threatened to squeeze industry profits.

Chinese authorities made a pledge last week to release government stockpiles of industrial metals to tackle concerns over shortages and high prices. China is the world’s biggest consumer of seaborne iron ore, absorbing more than 70 per cent of global production.

“What [this intervention] tells me is they’re very very frustrated, they’re trying to reduce the inflation risk that high commodity prices pose to the economy,” said Tom Price, head of commodities strategy at Liberum.

Iron ore futures tumbled on the news, with the most active contract on the Dalian Commodity Exchange down 9 per cent to $173 a tonne.

In the physical market, where miners and steel mills buy and sell, iron ore was down 5 per cent at $206.55, according to a price assessment from S&P Global Platts.

The price of iron ore surged to a record high of more than $230 a tonne in May on strong demand from China and supply disruptions in Australia and Brazil. That delivered a huge windfall to big producers, a group that includes Rio Tinto, BHP Group and Vale.

The NDRC said in a statement it would “closely scrutinise changes to spot prices, swiftly investigate irregular transactions and malicious speculation, and . . . will severely punish and publicly expose acts such as monopolistic behaviour, spreading around information about price increases, driving up prices and hoarding”.

High metals prices and falling consumer growth have squeezed Chinese heavy industry, with the producer price index climbing 9 per cent in May while consumer prices have remained unchanged.

However, commodity prices have suffered a sharp retreat over the past week, hit by the hawkish shift in tone from the US Federal Reserve and China’s interventions to try and curb inflation. Copper hit an all-time high of $10,500 a tonne on the London Metal Exchange last month but has since come back to about $9,000 a tonne.

The Bloomberg Commodity index peaked earlier in June but has since fallen off 5 per cent, with a drop in the gold price also contributing to its decline.

UBS analyst Myles Allsop said the iron ore price was approaching an “inflection point” through China’s tightening of credit and supply.

“Steel demand is also set to moderate in the second half [of the year] with China tightening credit,” he said. “Brazilian supply is lifting with Vale’s shipments up 14 per cent year to date.”

In London, shares in Rio fell as much as 3 per cent on the news before rebounding, as the FTSE 100 index rose as much as 0.7 per cent in morning trading.