Dalian and Singapore iron ore futures tumbled on Monday, weighed by a gloomy demand outlook for the steelmaking ingredient in China, where many steel mills are nursing losses and cutting production.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange ended daytime trade 5.8% lower at 719.50 yuan ($107.49) a tonne, extending losses to a third session and touching its lowest since June 23.

On the Singapore Exchange, the front-month August contract was down 4.8% at $109.15 a tonne, as of 0709 GMT.

Mills in top steel producer China have idled dozens of blast furnaces as stocks piled up after domestic demand weakened, hit by COVID-19 lockdowns and bad weather.

The rising prospect of a global recession also weighed on sentiment, along with China’s deliberate move to curb steel output under its decarbonisation plan.

“We expect iron ore futures will trade lower this week given these overwhelming price negative factors,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.

Cities in eastern China tightened COVID-19 curbs on Sunday as coronavirus clusters emerge, posing a new threat to China’s economic recovery under the government’s strict zero-COVID policy.

Resurgent iron ore shipments from Australia and Brazil, causing China’s portside inventory to rise last week after declining for eight straight weeks, and Chinese property developer Shimao Group missing a bond repayment, also fuelled the sell-off.

“Given that Chinese blast furnaces will likely continue exercising better production discipline, we anticipate that iron ore port stocks should extend inventory builds this week,” Widnell said.

Nearly 90% of domestic steelmakers suffered losses from weak sales and low prices, according to Chinese industry data provider Mysteel.

Construction steel rebar on the Shanghai Futures Exchange fell 3.4%, hot-rolled coil dropped 3.8% and stainless steel dipped 1.1%.

Dalian coking coal DJMcv1 shed 4.3% and coke slumped 3.8%.

Source: Reuters