(Yicai Global) Dec. 11 -- China’s steel mills are calling on national regulators to get to the bottom of an unprecedented surge in the price of iron ore, the alloy’s main ingredient, to an eight-year high last week, in what they regard is the result of highly irregular, even illegal, market activity.

The steep rise in iron ore prices has deviated from the fundamentals and greatly exceeded the expectations of steel producers, according to a statement posted on the China Iron and Steel Association website today, citing participants in a forum convened by the CISA yesterday. The iron ore market pricing mechanism has failed and shows obvious signs of capital speculation, they said.

Iron and steel giants, such as China Baowu Steel Group, Jiangsu Shagang Group, Ansteel Group and Shougang Group, called on the State Administration for Market Regulation and the China Securities Regulatory Commission to intervene and investigate and to severely crack down on any possible violations, the CISA said.

This is the third time the CISA has made a statement on the rise in iron ore prices this week. China is feeling the impact hard as it is the world’s largest steel producer and the largest iron ore importer. On Dec. 6, Vice Chairman Luo Tiejun said the sharp rise was due to an artificial market tension.

Luo has also held talks with Rod Dukino, vice president for sales and marketing at Australian mining firm BHP Billiton, and other executives, to discuss the pricing mechanism, the CISA said.

The recent surge in iron ore prices has exerted a profound impact on the profits of Chinese steel mills. Some companies’ margins have swerved into the red and their losses are expected to continue to climb, the association said. This is not conducive to the stability of the industrial and supply chains. It will also seriously weaken the international competitiveness of China's manufacturing industry, it added.

The Platts iron ore price index jumped to over USD145 per ton on Dec. 4, up more than 50 percent from the year’s start and at an eight-year high. The dominant contract I2101 of iron ore futures at the Dalian Commodity Exchange also rose to CNY993 (USD152) per ton, a record high since listing in 2013.

Editor: Kim Taylor