Iron ore, a barometer for the Chinese economy and driver of the Australian dollar, is probably having its wildest year ever. Prices jumped to a record above $230 a ton in May, crashed to about $85 in November on a government pledge to reduce steel output, and have now rallied 50% in just six weeks.
The volatility is set to persist into 2022 as a rebound in steel production this month falters early next year, with the usual seasonal output constraints tightening in the run-up to the Winter Olympics in February. Beyond that, strong headwinds are building: China is pushing ahead with cutting carbon emissions, steel output is expected to shrink for a second year, while a debt-laden property sector is weighing on steel consumption and broader growth.