(Bloomberg) -- Iron ore declined as investors weighed expectations that the steelmaking raw material will face a surplus next year.

Futures in Singapore slumped as much as 3.6% on Monday, the most in more than three weeks, after six weeks of gains. Iron ore has found support from moves by China’s authorities to bolster the real estate sector, as well as expectations for more fiscal stimulus and forecasts that steel output will rebound this month. 

“We think overall iron ore supply and demand will further loosen in 2022,” China International Capital Corp. analysts Zhilu Wang and Chaohui Guo said in a note. They said they expect steel consumption in 2022 to decline by 1.2% from last year, dragged down by a weaker construction sector and the government’s carbon goals, and a 25-million-ton rise in shipments from major miners. 

The comments echo forecasts from the government-backed China Metallurgical Industry Planning and Research Institute, which indicated that steel consumption will fall 4.7% in 2022. 

Still, “if real estate investment rebounds more than expected or the constraint on steel production is weaker than expected, iron ore prices may remain above $100,” the CICC analysts said.

Also weighing on markets, China reported over the weekend the highest number of local virus cases since January. An outbreak in Shaanxi province is becoming one of China’s biggest challenges yet to its zero-Covid policy. Asian stocks and Comex copper both dropped.

Iron ore in Singapore declined 2.6% to $124.15 a ton by 9:43 a.m. local time after a 6.3% advance last week. Prices in Dalian also dropped, while steel rebar and hot-rolled coil futures eased in Shanghai.

©2021 Bloomberg L.P.