MANILA: Chinese steel futures fell on Wednesday after hitting two-week highs in the previous session, dragging down the prices of steelmaking ingredients including iron ore as global economic headwinds added to worries about demand for ferrous metals.

Concerns over a rapid rise in steel production in recent weeks amid a fragile domestic demand recovery, and the prospect of intensified Covid-19 restrictions in China also weighed on the ferrous complex. The most-traded January rebar contract on the Shanghai Futures Exchange ended daytime trade 1.3% lower at 3,741 yuan ($537.07) a tonne, snapping a three-session rally.

Hot-rolled coil, which is steel used in producing home appliances and car bodies, fell 1.6% to 3,800 yuan a tonne, while stainless steel dropped 1.8% to 17,065 yuan a tonne.

Asian shares tumbled, the dollar held firm and two-year Treasury yields hit a new 15-year high, as a US inflation report dashed hopes for a peak in inflation, fuelling bets rates may have to be raised higher for longer.

“Overseas interest rate hikes are detrimental to global commodities,” analysts at Zhongzhou Futures said in a note. China is the world’s biggest producer and exporter of steel.

The most-active January iron ore contract on China’s Dalian Commodity Exchange dipped 0.7% to 720.50 yuan a tonne, also pulling back from a two-week peak. Coking coal and coke shed 0.6% and 0.1%, respectively. On the Singapore Exchange, benchmark October iron ore slumped 2.8% to $100.45 a tonne.

“If the (steel) demand in the peak season cannot be sustained, there will still be pressure to reduce excess production in the later period,”

Zhongzhou analysts said, referring to a seasonal increase in construction activity in China in September and October ahead of winter. A typhoon, meanwhile, gained strength in the East China Sea, which could interrupt construction and other activities in China.