BEIJING: Chinese stainless steel futures dropped on Wednesday, after opening more than 7% higher, as cautious investors assessed the uncertainties caused by a surge in prices of raw material nickel.

The most-active stainless steel contract on the Shanghai Futures Exchange, for April delivery, dropped as much as 4.2% to 20,655 yuan ($3,270.11) a tonne, after touching 24,785 yuan per tonne earlier during the session.

“Current stainless steel prices have deprived from its own supply and demand fundamentals,” said Fu Zhiwen, analyst with Huatai Futures.

Fu also added that once the nickel turmoil on the London Metal Exchange (LME) comes to an end, stainless steel prices could back within reasonable range. The LME was forced to halt nickel trading after prices more than doubled to over $100,000 per tonne on Tuesday. Shanghai nickel contract hit a trading limit of 17% in morning session.

Other steel products on the Shanghai bourse all fell. Steel rebar, for May delivery, inched down 0.6% to 4,953 yuan a tonne and hot rolled coils used in the manufacturing sector slipped 1.5% to 5,158 yuan per tonne.

Steelmaking raw materials on the Dalian Commodity Exchange were mixed, with coking coal futures edging 0.3% higher to 3,074 yuan a tonne while coke prices down 0.2% to 3,749 yuan per tonne.

Benchmark iron ore futures dropped 1.1% to 836 yuan a tonne, tracking spot 62% iron ore which slid $2.5 to $160.5 per tonne on Tuesday, according to SteelHome consultancy.