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MANILA: Dalian iron ore futures tumbled more than 6% on Monday, while the steelmaking ingredient dropped below $110 in Singapore, weighed by a gloomy outlook for demand in China, where many steel mills are nursing losses and cutting production.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange fell as much as 6.3% to 716 yuan ($106.98) a tonne, extending its losses to a third session, and touching its lowest since June 23.

On the Singapore Exchange, iron ore’s front-month August contract slumped up to 5% to $108.85 a tonne, the weakest level since June 23. Mills in top steel producer China have idled dozens of blast furnaces as stocks piled up after domestic demand weakened, hit by COVID-19 lockdowns and bad weather.

The rising prospect of a global recession also weighed on sentiment, along with China’s deliberate move to curb steel output under its decarbonisation plan.

“We expect iron ore futures will trade lower this week given these overwhelming price negative factors,” said Atilla Widnell, managing director at Navigate Commodities in Singapore. Cities in eastern China tightened COVID-19 curbs on Sunday as coronavirus clusters emerge, posing a new threat to China’s economic recovery under the government’s strict zero-COVID policy.

Resurgent iron ore shipments from Australia and Brazil, causing China’s portside inventory to rise for the first time last week after declining for eight straight weeks, and Chinese property developer Shimao Group missing a bond repayment, also fuelled the sell-off. “Given that Chinese blast furnaces will likely continue exercising better production discipline, we anticipate that iron ore port stocks should extend inventory builds this week,” Widnell said. Construction steel rebar on the Shanghai Futures Exchange fell 3.1%, hot-rolled coil dropped 3.4% and stainless steel dipped 0.9%. Dalian coking coal shed 4.3% and coke slumped 3.6%.

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