Reuters reported that Chinese steel rebar futures sagged to their lowest in more than three weeks and were set to post their biggest weekly loss since mid March on worries that a significant boost in supply would dampen a fragile seasonal recovery in demand.

The most briskly trade rebar for October delivery on the Shanghai Futures Exchange hit a session low of CNY 3,236 per tonne, its weakest since March 25. The price of rebar since hitting a one month high of CNY 3,425 on April 8, having struggled to sustain gains since bouncing off a record low of CNY 3,141 reached in mid March.

Rebar is down more than 3 percent so far for the week.

The most-active September iron ore contract on the Dalian Commodity Exchange dropped to CNY 774 per tonne, its lowest since March 28, before cutting losses to CNY 783 down 1.8%. It has lost 3.6% for the week.

China Iron and Steel Association data showed that daily crude steel output in China, the top producer and consumer, jumped nearly 4% to 2.152 million tonnes in the first 10 days of April compared with the March 21-31 rate.

There is an estimated excess steel production capacity of between 200 million tonnes and 300 million tonnes a year in China, a long running problem that Beijing is aiming to resolve this year by curbing credit to the sector and shutting outdated facilities.

The sharp rise in output in early April suggests mills responded to a rebound in steel prices from lows in March and were hoping to benefit from a seasonal pickup in demand as construction activity increases from this month.