BEIJING: Prices for steelmaking ingredients on China’s Dalian Commodity Exchange dropped on Tuesday as latest control measures due to the recent surge in COVID-19 cases hurt transportation and production levels at mills and also dampened demand.

“Affected by the pandemic situation, downstream demand has been subdued, while the disrupted transportation has together led to increasing inventory at coking plants,” analysts with GF Futures wrote in a note.

Coke inventories at 230 coking plants stood at 11.5 million tonnes last week, up 1.1% from a week earlier, data from Mysteel consultancy showed. As profit margins at steel mills are relatively low, GF Futures added there’s possibility for coke producers to cut prices.

The most-active coke futures on the Dalian bourse for May delivery was down 1.6% at 3,567 yuan ($560.67) a tonne, as of 0330 GMT. Coking coal prices dropped 0.9% to 2,988 yuan per tonne.

Benchmark iron ore futures on the Dalian exchange dipped 0.7% to 824 yuan a tonne. Portside iron ore stocks in China had been falling for four straight weeks to 155.8 million tonnes, as of March 20, according to Mysteel.

However, Haitong analysts warned that policy risks are not eliminated yet as overall iron ore inventory still at high levels. Steel prices on the Shanghai Futures Exchange were traded within a tight range. Steel rebar, used for construction materials, inched 0.2% higher to 4,936 yuan a tonne. Hot-rolled coils, used in the manufacturing sector, rose 0.9% to 5,178 yuan per tonne.

Stainless steel prices for April delivery stalled at 20,020 yuan a tonne. A cabinet meeting chaired by China’s Premier Li Keqiang said on Monday the country would maintain stable operation in the capital market and give around 1 trillion yuan in tax rebates to domestic small firms to shore up economy.