Beijing is fretting over record prices for commodities such as copper and iron ore. Officials have vowed to punish speculation and false price-sensitive information. The real cost may be borne by foreign purchasers of everything from washing machines to steel joists.

China’s tough talk reflects growing fears of inflation. Regulators called in the largest local metals producers and ordered a halt on higher prices. Iron ore hit almost $230 per tonne earlier this month while copper peaked at almost $5 per pound on international exchanges.

The crackdown has worked — for the moment. Iron ore futures fell as much as 9.5 per cent on Monday on the Dalian Commodity Exchange. Copper and aluminium futures also slipped.

For all its fury against “speculators”, Beijing bears some responsibility for higher prices itself. Demanding carbon-neutral targets prompted some big steelmaking cities to cuts production by up to a half. Local steelmakers passed on steep prices to other industries, including construction and automotives.

Beijing’s intervention curbs that strategy. The operating profit margins of Chinese steelmakers has always been narrow, at as little as 3 per cent last year. Many have booked negative profits since December when ore prices hit an eight-year high.

Local iron ore port inventories have been dropping since last month. That is reflected in shares of Baoshan Iron & Steel, the listed subsidiary of Chinas’ largest steelmaker Baowu. These have lagged the stock of regional peers such as South Korea’s Posco over the past year.

China accounts for three-fifths of the world’s crude steel production. Alternatives are pricier and face their own challenges. European steel output has remained weak since 2019. The production rate in India, which is struggling with a severe coronavirus outbreak, slowed by a fifth last month.

Beijing cannot backtrack on its carbon neutral goals without embarrassment. Chinese steelmakers lack the profitability to absorb higher costs. China could square the circle another way: support foundries financially with proceeds from charging higher prices for manufactured goods.

Consumers of the world, you have nothing to lose but your purchase discounts.

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