(Bloomberg) — Iron ore extended its rout as BHP Group warned it sees an increasing likelihood of “stern cuts” to China’s steel output this year.

The prospect of much lower steel production in the second-half is “testing the bullish resolve of the futures markets,” BHP wrote in a commodities outlook report on its website. Iron ore in Singapore has plunged by a third since spiking to an all-time high in May.

China’s steel industry is under pressure after pledging to reduce output this year, a goal that requires huge second-half curbs to offset booming output earlier in 2021. Production in July was more than 8% lower year-on-year, data on Monday showed.

Futures in Singapore fell 6.5% to $147.95 a ton by 6:49 p.m. local time, and were heading for a fifth weekly loss. In China, futures dropped 2.5% to close at the lowest level since November.

While investor attention is very focused on China’s output curbs in the second half, the nation’s demand trends will also be critical. Beijing is pushing a range of measures to control the property sector, which accounts for big chunk of steel usage and has traditionally helped drive surges in iron ore prices.

“Policymakers are clearly concerned about over-investment and concentrated credit risk in the property sector,” Commonwealth Bank of Australia wrote in an emailed note. And even if China swings to more pro-growth policies to battle recent weakness, “there’s a good chance that the property sector is left out”.

Shanghai steel futures also dropped, with hot-rolled coil down 3.3% and rebar down 3.8%.

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