MANILA: Benchmark Shanghai steel futures extended gains to rise more than 4% on Tuesday, as China’s efforts to address financial distress in its troubled property sector calmed frayed nerves, although iron ore prices were subdued.

Top steel producer China’s property sector, which accounts for about a quarter of domestic steel demand, has been under the spotlight amid a widening mortgage-payment boycott on unfinished real estate projects.

Chinese regulators have stepped up efforts to encourage lenders to extend loans to qualified projects, moving to ease a turmoil that could add strain to an economy already hit hard by COVID-19 lockdowns. Construction steel rebar on the Shanghai Futures Exchange rose up to 4.4% to 3,872 yuan ($573.64) a tonne. It rebounded by a modest 0.2% in the previous session after hitting a 19-month low on Friday. Hot-rolled coil, which is steel used in car bodies and home appliances, also climbed as much as 4.4% to 3,863 yuan a tonne, bouncing off a 20-month low. Stainless steel, however, slipped 0.3%.

“We’re quietly confident Chinese authorities won’t allow property developers who are ‘too big to fail’ to go bankrupt, avoiding any prospective risks of contagion to the country’s banking sector,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.

Futures prices of some steelmaking raw materials also extended their rebound, with coking coal up 2.2% on China’s Dalian Commodity Exchange, while coke climbed 2.3%. But, with overall Chinese steel demand outlook still clouded by COVID-19 risks and bad weather, iron ore’s front-month August contract on the Singapore Exchange was down 0.4% at $100.35 a tonne, as of 0321 GMT.