China iron ore futures inch up on bank liquidity easing reports

China's iron ore futures edged up on Thursday, snapping three straight sessions of losses as reports circulated that the central bank was moving to ease liquidity conditions for banks. Iron ore futures for May delivery on the Dalian Commodity Exchange rose 0.21 percent to settle at 476 yuan ($77) a tonne, while the most-traded May rebar contract on Shanghai Futures Exchange slipped 0.04 percent to 2,482 yuan a tonne.

China Business News reported on Wednesday that the central bank was planning to include interbank lending by non-bank financial institutions as part of the calculated deposit base. Quoting unnamed insider sources who attended a meeting with the central bank, the report said 24 major financial institutions were also told that even if interbank assets are including in the base, they may not need to set aside additional reserves, leaving more liquidity available for lending and investment.

Still, a combination of sluggish demand, along with worries of a worsening supply glut at home and abroad, continued to weigh on iron ore markets. Analysts said Chinese iron ore production would rebound should the government agree to a proposal by the China Iron Ore & Steel Association to cut taxes for local iron ore miners. "The tax cut will help these mines but it will be bearish for prices because producers will immediately pass on the cost savings as they compete for buyers," said a Hangzhou-based analyst at Nanhua Futures. Benchmark 62 percent grade iron ore for immediate delivery to China slightly rose 0.6 percent to $66.20 a tonne on Tuesday, according to data compiled by the Steel Index.

Copyright Reuters, 2014