Chinese iron ore and coke futures tumbled on Monday, dragged down by concerns over weak demand for the steelmaking ingredients, as markets eyed the possibility of further production cuts in the top steel-producing city of Tangshan.
China, which accounts for more than half of the world's steel output, has vowed to go after violators of air quality rules in its steel industry, with Tangshan issuing a notice threatening to extend production curbs to combat pollution.
The most-traded May iron ore on China's Dalian Commodity Exchange ended the morning trade 5.9% lower at 1,004.50 yuan ($154.35) a tonne.
On the Singapore Exchange, the front-month April contract dropped 3.4% to $148.90 a tonne.
Dalian coke slumped 6.7% to 2,144 yuan a tonne. Dalian coking coal shed 1.9%.
The clampdown in Tangshan is seen as part of China's move to tighten environmental regulations over the next three years.
"We think the next three years could be marked as 'Supply-side reform 2.0', during which time we should see accelerating policy changes limit production growth in the industry - this time due to tightening environmental regulations," analysts at JP Morgan wrote in a note on March 16.
Supply-side reform was the key theme for the Chinese steel industry in recent years as the government sought to sort out the sector's overcapacity issues amid concerns about financial risks stemming from the sector's high leverage, JP Morgan said.
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