MANILA: Iron ore futures dipped on Tuesday after hitting a more than two-month high in the previous session, as modest cuts in China’s loan prime rates weighed on sentiment.
Top steel producer China cut lending benchmarks on Tuesday in the first such easing in 10 months, seeking to shore up a slowing recovery. The most-traded September iron ore on China’s Dalian Commodity Exchange fell as much as 1.8% to 799 yuan ($111.36) per metric ton.
It hit an intraday high of 825 yuan on Monday, its highest since March 31 amid hopes of further government support for the struggling domestic property sector.
On the Singapore Exchange, the steelmaking ingredient’s most-active July contract was down 0.8% at $112.95 per metric ton, as of 0258 GMT. It hit $115 on Monday, its strongest since April 18. “Given that the 10-basis point reduction was already priced-in to the market, there’s a sense of ‘buy the rumour, sell the news’ following the latest rate decision on the one-year and five-year loan prime rates,” Navigate Commodities managing director Atilla Widnell said.
“At the same time, overly optimistic financial market participants have been praying for broader strokes with deeper rate cuts and injections of multi-trillion renminbi special purpose bond issuances.” The size of the reduction in the five-year loan prime rate, which serves as mortgage reference rate, was less than expected, according to a Reuters survey. “The latest rate decision signals that the PBOC will be measured and targeted – highly disappointing for China and iron ore bulls,” Widnell said.
Other steelmaking ingredients also dropped, with coking coal and coke on the Dalian exchange falling as much as 3.7% and 2.6%, respectively. Rebar on the Shanghai Futures Exchange dipped 1.4%, hot-rolled coil shed 1.5%, wire rod lost 1.1%, and stainless steel dropped 1.7%.
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