With Beijing questioning major miners on their role in record-high prices that are squeezing steel mill margins, Anglo-Australian iron ore miner Rio Tinto says it expanded its iron ore shipments and on-demand sales to meet increased demand for the steelmaking ingredient in China this year. On Tuesday, China Iron & Steel Association (CISA), the domestic steel industry association, held a video conference with Rio, one of China’s biggest iron ore suppliers, days after an online meeting with rival miner BHP , and said the current ore price was “unreasonable”. That price stood at about US$153 per tonne on Wednesday, after reaching nearly US$160 a tonne last week – about double the price at the start of the year. CISA questioned whether miners had deliberately restricted supplies to send prices soaring. However, commodities analysts said factors such as buoyant demand for steel production, as well as speculation in iron ore futures on the Dalian Commodities Exchange (DCE), had also contributed to the high prices. Nonetheless, the price spike has turned heads in Beijing’s policymaking circles, with some seeing it as a threat to industrial security – a highlight of President Xi Jinping’s newly released long-term development vision , according to analysts. CISA vice-chairman Luo Tiejun described the current situation as “not conducive to the long-term healthy development of upstream and downstream” iron ore and steel industries, according to an association statement. “Both suppliers and consumers must study and establish a new pricing mechanism instead,” Luo said on the call with Rio executives that included Simon Farry, vice-president for iron ore sales and marketing at the miner. CISA held a similar discussion with BHP last week while also calling on Chinese regulators to investigate a spike in prices on the Dalian Commodity Exchange, saying there were signs that speculators had driven up prices of derivatives and this had spilled over into actual iron ore prices. Rio Tinto acknowledged the strong demand for iron ore and the challenges of volatile prices, saying it was willing to work with China to improve the pricing mechanism. In comments to the South China Morning Post , Rio Tinto said it was keen on helping its clients ensure that the iron ore market remained open and transparent. “As examples, Rio Tinto have expanded iron ore sales to ports in China, pioneered port sales of iron ore via a WeChat app, and led the industry in completing fully paperless end-to-end transactions using blockchain technology,” a spokesman said. While Fortescue Metals Group , another major iron ore supplier to China, has yet to have its regular meeting with CISA, CEO Elizabeth Gaines said the miner was also willing to work with Beijing on market concerns. Iron ore price surges amid strong demand and souring China-Australia ties “As a low-cost supplier of seaborne iron ore to China, our well-established marketing strategy is centred on the long-term needs of our customers,” Gaines told the Post . Commodities analysts said it was important that China examine the impact of its economic stimulus policies, as well as the extensive “casino-style” iron ore futures trading at the Dalian Commodities Exchange, on the price of iron ore. Traders have been rushing into asset markets in search of better returns amid a low-interest environment. In our opinion, iron ore prices have been buoyed since August by a combination of asset-price inflation, relatively tighter market fundamentals, and increased futures speculation Atilla Widnell, Navigate Commodities After Beijing said last week that it would introduce trading caps, iron ore futures prices fell on Monday. But they picked up again on Tuesday following the release of new data showing a continued strong industrial recovery, according to ANZ Research. Accordingly, prices of the underlying asset, iron ore, fell minimally. Despite a raging political conflict between China and Australia, it was highly unlikely that the CISA’s meetings with miners were politically driven, said Navigate Commodities’ managing director, Atilla Widnell. “We believe the CISA is looking to apportion blame for spiralling [domestic] iron ore price hikes, which have been partly fuelled by domestic futures speculation on the Dalian Commodity Exchange,” he said. “In our opinion, iron ore prices have been buoyed since August by a combination of asset-price inflation, relatively tighter market fundamentals and increased futures speculation.” There were also uncontrollable factors affecting production such as cyclone season in the Pilbara region in Western Australia, the heart of Australia’s iron ore mining operations, Widnell said. In addition, the other major iron ore supplier to China, Brazil’s Vale , had not resumed full production after a dam collapse last year. These factors are tugging on steel resources in a manner not witnessed since China’s 2004-2008 super-cycle building programme Melinda Moore, Cleanup Commodities Cleanup Commodities managing director Melinda Moore said Beijing also had the capacity to roll out short-term policies to reduce economic stimulus and cool the demand for iron ore, although she said reversing stimulus could create other problems. “Iron ore prices are actually galloping to eight-year highs due to the colossal explosion in structural global build-build-build demand momentum,” she said, pointing to trillions of US dollars worth of stimulus measures driving global demand for metals, as well as to “the Chinese State Council’s recent advice to Chinese provinces to remove all barriers to stimulate auto and white goods demand at all costs to help fund its dual-circulation ‘go-it-alone’ priorities”. “Together, these factors are tugging on steel resources in a manner not witnessed since China’s 2004-2008 super-cycle building programme,” she said. Mao Zhenhua, founder of China Chengxin Credit Rating Group and co-head of the Institute of Economics at Renmin University of China, also called for a resource-saving growth model to prevent a potential supply crisis of crude oil, grain and iron ore. “We must have a bottom-line mindset and stay high alert to commodity supply risk,” said a report released by Mao’s institute last month. “It’s not only an economic issue, but also a matter of national security and strategy.” Despite the overcapacity curbs amid China’s well-known supply-side reform, the nation’s crude steel production rose by nearly a third in the past five years and will, for the first time, surpass the mark of 1 billion tonnes this year. Australia unwilling to ‘give up ground’ as iron ore exports to China rise The January-November output jumped 5.5 per cent year on year to 961 million tonnes, according to the National Bureau of Statistics. China imports more than 80 per cent of its iron ore, mainly from Australia, which makes China extremely vulnerable to international price and production changes. About 660 million tonnes, or 63 per cent, of last year’s imports were from Australia, mainly via Rio Tinto, BHP and Fortescue Metals Group. While the reliance on Australian ore will not change in the short term, Beijing’s plans for more self-sufficiency in the raw material, critical to President Xi’s dual-circulation strategy, indicate that potentially bolder actions to reduce dependency may be in the works.