STEEL futures in China posted their biggest weekly fall since 2009 Friday.

    Weakening fundamentals along with strong measures by Chinese exchanges to stamp out speculative activity have helped reverse momentum in China’s massive commodity futures markets from bullish to bearish in less than a month.

    Iron ore futures in China have fallen more than 27 percent from their April peak, pulling the global spot benchmark down 21 percent from last month’s high.

    The crackdown on speculators in China’s steel markets has doused a recovery in base metals prices on the London Metal Exchange and the sustained fall in Chinese commodities has similarly pressured grain futures on Chicago Board of Trade, analysts say.

    Rising levels of open interest, or open contracts, in China’s steel and iron ore futures, as prices fall deeper suggest investors are looking at more downside risk.

    “The sentiment is very bearish now and investors are looking for opportunities to take more short positions,” said Wu Wei, an analyst at Yong’an Futures in eastern China’s Hangzhou.

    The softer outlook for the Chinese economy, rising steel production and waning seasonal demand have fuelled the sharp losses in steel-linked futures, said Wu.

    The most-traded rebar on the Shanghai Futures Exchange closed down 4.6 percent at 2,030 yuan (US$311) a ton after falling by the 6 percent maximum allowed by the exchange.

    Rebar, or reinforcing steel used in construction, surged 80 percent from last December to April, but has since dropped 27 percent. It has lost more than 12 percent last week, the most since the contract was launched in 2009.

    The price rally pushed some shuttered steel mills in the world’s top producer to resume production, but the ensuing price rout could make them unprofitable again.

    Iron ore on the Dalian Commodity Exchange fell 5.2 percent to close at 363 yuan a ton after also dropping by its 6 percent downside limit. (SD-Agencies)