NGLOY - Despite iron ore's drop China may find it tough to tame surging commodities
Iron ore prices have plunged this week following China's measures aimed at cooling hot industrial commodities, but analysts suspect China's efforts will have only temporary success unless authorities take steps to curb consumption, which could cut economic growth, Reuters reports.Most-active iron ore futures in Singapore are down more than 4% this week, now below $194/ton after hitting a record $234/ton on May 12.But with China's ongoing economic growth driving strong metal use in manufacturing and construction, and overall metal supplies constrained for various reasons, the government may have only a limited influence on prices unless it creates real demand reductions."When it comes to commodities, Chinese officials are between a rock and a hard place," as price stabilization "would require curbing demand," which would harm economic growth, HSBC's co-head of Asian Economics Research Frederic Neumann tells Reuters.If supply remains inelastic, "you can't suppress demand without hurting the economy," ING commodity strategist
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Despite iron ore's drop, China may find it tough to tame surging commodities