Iron ore slumped on Wednesday to its lowest level this year in Singapore as China faces fresh COVID-19 flare-ups in several areas including Shanghai, stoking concerns over further lockdowns in the world’s biggest steel producer.

Growing prospects of a global recession also weighed on most commodities markets, adding to concerns over an already weak demand in top metals consumer and iron ore importer China.

Iron ore’s front-month August contract on the Singapore Exchange dropped as much as 5.4% to $106.45 a tonne. It was down 1.3% at $111, as of 0817 GMT.

On China’s Dalian Commodity Exchange, however, the steelmaking ingredient’s most-traded September contract DCIOcv1 ended daytime trade 1.8% higher at 747 yuan ($111.42) a tonne, after swinging wildly between losses and gains throughout the session.

Shanghai, China’s most populous city, has lifted a two-month-long lockdown, but the government continues to impose targeted curbs on movements whenever cases are detected.

All residents in nine of the financial hub’s 16 districts would be tested twice this week following another outbreak.

“As we have repeatedly said, tighter COVID measures could return to China. And there are more positive COVID tests once more in Shanghai,” ING economists said in a note.

China’s dynamic zero-COVID policy had prompted widespread lockdowns in recent months, curtailing economic activity, but some mandates have recently been eased.

“But even if there are more lockdowns, we expect these to be a lot more localised than the ones in March to May, as the government is trying to balance controlling COVID and growing the economy,” ING economists said.

Dalian coking coal rose 1.1% and coke gained 1.3%, clawing back some lost ground.

Construction steel rebar climbed 1.1% on the Shanghai Futures Exchange, hot-rolled coil advanced 0.7%, and stainless steel added 0.4%.

Source: Reuters