China’s army of commodities investors have racked up an unprecedented volume of bets on steel futures, raising the prospect of a sharp retreat if market conditions weaken.

Open interest on the Shanghai Futures Exchange’s steel reinforcement bar contract surged to a record 2.82 million lots on Monday, according to bourse data, with each lot representing 10 metric tons of metal. That’s more than double the level at the start of the year, with investors piling up positions in the past two weeks as prices rallied. Rebar’s benchmark October contract returned to a bull market on Monday after rising more than 20 percent from this year’s low in mid-April.

“There has been quite a lot of money flowing into rebar futures recently, and prices are very volatile amid big market uncertainties,” Li Xiaodong, an analyst at Nanhua Futures Ltd., said by phone from Hangzhou. “The market…