BEIJING: Chinese iron ore futures plunged more than 6% on Monday, falling for a second straight session and denting steel prices by more than 3%, as stringent COVID-19 restrictions prompted traders to be cautious and fuelled concerns over global demand.

The capital city of Beijing has implemented rounds of COVID-19 tests, closed entertainment venues, banned dine-in services at restaurants and urged staff at certain areas to work from home, as parts of efforts to persist its “dynamic-zero approach”.

“It’s not looking pretty this week with even more negative COVID-related headlines for Beijing, Guangdong, and Jilin released over the weekend,” said Atilla Widnell, managing director with Navigate Commodities.

“It’s looking increasingly likely that Chinese blast furnaces will struggle to justify high utilisation and operating rates in a demand- and margin-negative environment,” he added. The most-active iron ore futures on the Dalian Commodity Exchange, for September delivery, dived as much as 6.8% to 798 yuan ($119.09) a tonne in morning session. They were down 5.7% to 808 yuan per tonne, as of 0236 GMT. Coking coal futures on the Dalian bourse slumped 4.3% to 2,658 yuan a tonne, after the state planner pledged stronger supervision to stabilise prices, and coke fell 3.8% to 3,396 yuan per tonne. The plunge in raw materials had also pressured steel prices on the Shanghai Futures Exchange.

Construction material rebar, for October delivery, slipped 3.4% to 4,668 yuan a tonne. Hot-rolled coils declined 3.3% to 4,770 yuan per tonne.

“Despite positive signal from the Politburo meeting, current downstream demand is still largely affected by the pandemic,” analysts with SinoSteel wrote in a note, adding that steel inventories increased while apparent consumption was sluggish. Shanghai stainless steel futures, for June delivery, inched 0.7% higher to 19,230 yuan a tonne.