China’s iron ore futures stretched losses on Thursday, pressured by persistent weakness in fundamentals, while investors shrugged off the central bank’s decision that may ease liquidity tightness to spur growth.
Iron ore futures for May delivery on the Dalian Commodity Exchange were down for the second straight day, with a 0.2 percent loss at 475 yuan ($76) by midday.
Some Chinese steel mills have returned to the market for replenishing stockpiles ahead of the Lunar New Year holiday, while a supply glut and leaner steel demand have put a lid on prices of the raw material.
“While some buying activity emerged with steel mills taking advantage of current low prices ahead of the holiday period, the demand fundamentals for iron ore remain weak as structural oversupply persists,” ANZ Bank said in a note on Thursday.
Fitch Ratings has lowered its average iron ore price estimate for this year to $65 a tonne from $90, due to weaker growth in Chinese steel production.
The China Iron & Steel Association forecast the country’s crude steel output to fall 1.1 percent to 814 million tonnes this year, after rapid expansion in the last decade, as a slowing economy hit demand growth for commodities.
China’s economy faces formidable headwinds into 2015 as a property downturn persists while companies will continue to struggle to pay off debt and export demand may remain erratic.
China’s central bank lowered the reserve requirement ratio (RRR) for all commercial banks by 50 basis points, adding more liquidity to the world’s second-biggest economy to help boost bank lending and combat a growth slowdown.
However, analysts said the market reaction was muted to the central bank’s move as this is not enough to help boost the economy.
“The RRR cut will be more beneficial to small- and medium-enterprises rather than the property and infrastructure sector,” said Hu Xiaodong, an analyst with Nanhua Futures in Hangzhou.
The most-traded May rebar contract on the Shanghai Futures Exchange was down 0.2 percent at 2,479 yuan by midday.
Benchmark 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI fell 1 percent to $61.40 a tonne on Wednesday, according to data compiled by the Steel Index.