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MANILA: Chinese ferrous commodity futures dropped on Thursday with iron ore near a seven-month low, as focus shifted back to a gloomy demand outlook after a short-lived optimism from the latest government rhetoric on economy stimulus.

The most-traded iron ore, for September delivery, on China’s Dalian Commodity Exchange ended morning trade down 0.8% at 653.50 yuan ($96.64) a tonne, after earlier touching 646.50 yuan. On the Singapore Exchange, steelmaking ingredient’s front-month August contract fell 2.3% to $97.20 a tonne.

Concerns remain over COVID-19 lockdowns in China, the world’s top steel producer, and the impact on future demand for steel products and raw materials, despite the goverment’s oft-repeated pledge of policy support for the struggling economy.

The southern megacity of Shenzhen vowed to “mobilise all resources” to curb a slowly spreading outbreak, as authorities adhere to China’s unique “zero-COVID” policy. Risks from lockdowns have prompted the Asian Development Bank to lower its economic growth forecast for China this year by 1 percentage point to 4.0%.

Amid sustained weakness in demand, China’s iron ore market will likely be “oversupplied” in the second half of the year, analysts at Zhongzhou Futures said in a note. Portside iron ore inventory in China rose steadily over the last three weeks to hit a seven-week high of 130.6 million tonnes, as of July 15, SteelHome consultancy data showed, and analysts said stocks may pile up further. Steel mills have reduced output in recent weeks, putting their facilities under maintenance earlier than usual due to depressed margins.

Rebar on the Shanghai Futures Exchange slipped 0.6%, hot-rolled coil shed 0.7%, and stainless steel dropped 0.5%.

Dalian coking coal slumped 4.6% and coke fell 2.4%. Producers of coke, the processed form of coking or metallurgical coal and used in iron ore smelting, have also agreed to curb output to avoid bigger losses, Zhongzhou analysts said.

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