Can you end a years-long property crisis without triggering a surge in the commodity that stands to benefit most?

That’s the dilemma facing the Chinese government, which is taking the most decisive steps yet to ease the impact of a devastating real estate crunch. Yet it’s already grappling with the bullish consequences for the price of iron ore — a key source of commodity inflation for the world’s second-biggest economy.

As the steelmaking ingredient soared toward its highest level since June 2022, China’s top economic planning body sent staff to the exchange that hosts futures trading to pursue tighter supervision. The National Development and Reform Commission then cautioned against hype, manipulation and “illegal activities” in the market. The NDRC is also seeking to strengthen oversight of iron ore held at ports to prevent hoarding and speculation, according to a statement on Friday.

So the next moves in the market depend not just on whether Beijing’s stimulus measures leave iron ore supply stretched, but also on whether the government can rein in bulls as it reboots the real estate sector. Citigroup Inc. sees prices reaching $140 a ton soon, after they burst through $130 a ton on Nov. 15.

“When they’re doing something that fights the fundamentals, they can slow the basis of price appreciation and cause pullbacks,” said Marcus Garvey, head of commodities strategy at Macquarie Bank Ltd. “But they don’t deliver a sustained change in the trend.”

Traders in China also report a more bullish tilt in the market’s mood, although there’s widespread reticence about talking publicly given the government’s scrutiny of the market.