Prices of key steelmaking ingredients such as iron ore and coking coal, as well as steel products such as rebar and hot-rolled coil, all slid more than 5% as traders offloaded supplies.
Beijing's move follows a 30%-40% climb in several critical steel and metal prices so far in 2021, fuelled by a synchronised recovery in China's mammoth construction and manufacturing sectors from last year's pandemic.
China's cabinet announced on Wednesday that it will strengthen its management of commodity supplies and demand to curb "unreasonable" prices and investigate behaviour that bids up commodity costs.
"Some of the measures could have an immediate impact on the supply demand balance, for example, if the government decides to release some state reserve into the market," said Wood Mackenzie senior economist Yanting Zhou.
"Other measures will take effect over a longer time frame. However, these measures do have an immediate impact on price as it helps to manage the market expectation for further price increases," she added.
