Chinese steel futures fell on Wednesday after hitting two-week highs in the previous session, dragging down the prices of steelmaking ingredients including iron ore as global economic headwinds added to worries about demand for ferrous metals.

Concerns over a rapid rise in steel production in recent weeks amid a fragile domestic demand recovery, and the prospect of intensified COVID-19 restrictions in China also weighed on the ferrous complex.

The most-traded January rebar contract on the Shanghai Futures Exchange SRBcv1 ended morning trade 1.7% lower at 3,725 yuan ($534.87) a tonne, snapping a three-session rally.

Hot-rolled coil SHHCcv1, which is steel used in producing home appliances and car bodies, fell 1.9% to 3,787 yuan a tonne following a six-session winning run.

Asian shares tumbled, the dollar held firm and two-year Treasury yields hit a new 15-year high, as a U.S. inflation report dashed hopes for a peak in inflation, fuelling bets rates may have to be raised higher for longer.

“Overseas interest rate hikes are detrimental to global commodities,” analysts at Zhongzhou Futures said in a note.

China is the world’s biggest producer and exporter of steel.

The most-active January iron ore contract on China’s Dalian Commodity Exchange DCIOcv1 fell 1% to 718 yuan a tonne, also pulling back from a two-week peak. Coking coal DJMcv1 and coke DCJcv1 shed 0.3% and 1.2%, respectively.

On the Singapore Exchange, benchmark October iron ore SZZFV2 slumped 3.2% to $100.05 a tonne.

“If the (steel) demand in the peak season cannot be sustained, there will still be pressure to reduce excess production in the later period,” Zhongzhou analysts said, referring to a seasonal increase in construction activity in China in September and October ahead of winter.

A typhoon, meanwhile, gained strength in the East China Sea, which could interrupt construction and other activities in China.

Source: Reuters