BEIJING: Chinese iron ore futures plunged more than 8% on Wednesday, pulled down by sluggish spot market while restrictions on steel output across the country dashed prospects of restocking demand.

“The September delivery (of iron ore) remains wide contango,” analysts with SinoSteel Futures wrote in a report, noting that price for the deliverable product Super Special Fine has been recently lowered to 723 yuan ($111.88) per tonne. The September iron ore contract was traded around 880 yuan a tonne in morning session. While China has not relaxed steel production curbs as yet, mills are not supported to increase inventories in the short term and that could affect price gain in far-month contract, SinoSteel Futures added.

Benchmark iron ore futures on the Dalian Commodity Exchange, for January delivery, was down 8.1% at 763 yuan ($118.07) per tonne, as of 0255 GMT, the biggest percentage loss since July 30.

The most-traded September Singapore iron ore contract also slumped, down 6.1% to $143 a tonne.

Steel prices on the Shanghai Futures Exchange were also undermined by a drop in raw materials and tepid economic data. Construction used rebar fell 2.2% to 5,215 yuan per tonne and hot-rolled coils dropped 2.7% to 5,470 yuan a tonne.

Stainless steel futures on the Shanghai bourse dropped 3.3% to 17,700 yuan per tonne. Dalian coking coal dipped 0.3% to 2,454 yuan a tonne. Coke futures slipped 0.8% to 3,127 yuan per tonne. “Constrained by environmental-related disruptions and shortage of raw materials, coke supply will continue to be tight,” GF Futures said in a note.

China’s factory activity slipped into contraction in August for the first time in nearly 1-1/2 years as COVID-19 containment measures, supply bottlenecks and high raw material prices weighed on output in a blow to the economy.