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MANILA: Iron ore extended losses on Monday, with Dalian prices set for their sharpest monthly drop since February 2020, as an unexpected fall in October factory activity in China added to a gloomy outlook for the world’s biggest steel producer.

China’s official manufacturing purchasing managers’ index stood below the 50.0 mark expected in a Reuters poll, dragged down by softening global demand and COVID-19 curbs that hit production. The most-traded iron ore, for January delivery, on China’s Dalian Commodity Exchange ended morning trade 3.2% lower at 612 yuan ($84.27) a tonne, after touching its weakest since July 22 at 604.50 yuan earlier in the session.

It was on track for a more than 15% monthly drop. On the Singapore Exchange, the benchmark December contract was down 1.9% at $79.20 a tonne. It dropped to $75 earlier in the day, its lowest since September 2020.

Dalian iron ore has now fallen more than 30% from its June peak of 890 yuan a tonne, while SGX iron ore is more than 50% off an April high above $160. “The question on everyone’s lips now is, ‘how low can we go?’ To which the answer is, ‘it depends how fast marginal high-cost seaborne iron ore suppliers react to lower prices and reduce shipments’,” Navigate Commodities Managing Director Atilla Widnell said.

Year-end benchmark iron ore prices are forecast to be at their lowest in the last three or four years with China and Europe cutting steel output, while pressure mounts from additional supply.

Winter steel production curbs in China are likely to further dampen demand for iron ore and other steelmaking inputs. Dalian coking coal and coke slumped 3% and 4%, respectively. Rebar on the Shanghai Futures Exchange fell 2.3%, hot-rolled coil dropped 1.8%, wire rod shed 1.5%, and stainless steel lost 2%.

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