MANILA: Iron ore futures fell on Thursday as pessimism spurred by tepid steel demand in China prevailed, even as traders kept track of a strong cyclone that could disrupt supply from the world’s largest export hub for the steelmaking ingredient.

Weakening steel prices in China indicated lacklustre demand at a time when construction activity in the top iron ore consumer is picking up, analysts said.

The most-traded September iron ore on China’s Dalian Commodity Exchange ended morning trade 2.6% lower at 773 yuan ($112.45) a tonne. On the Singapore Exchange, iron ore’s benchmark May contract was down 1.9% at $115.95 a tonne, as of 0340 GMT.

“Spot rebar prices have dropped to lows back to late December, suggesting demand has indeed been softer even as CISA (China Iron & Steel Association) data points to surging steel production and falling steel product inventory,” Westpac analysts said in a note.

Daily crude steel output in China increased 29,600 tonnes, or 1%, over the first 10 days of April from late March to 3.08 million tonnes on average, the highest since mid-June 2021, based on Mysteel consultancy’s survey of 247 mills.

A potential supply disruption could provide support to iron ore prices, analysts said. Meanwhile, cyclone Ilsa, which could hit Australia’s northwest region - home to Port Hedland - was on Thursday upgraded to a category four storm - just below the strongest category five.

Port Hedland is the world’s biggest export point for iron ore and is used by BHP Group Ltd, Fortescue Metals Group Ltd and Hancock Prospecting.

Dalian coking coal and coke slipped 0.3% and 0.4%, respectively. On the Shanghai Futures Exchange, rebar fell as much as 1.5% to its lowest since Dec. 20, while hot-rolled coil dipped 1.4% to its weakest since Feb. 8. Wire rod dropped 0.6% and stainless steel shed 0.8%.