China's iron ore and rebar futures fell on Friday, with both commodities on track for a more than three percent decline this week, as worries about flabby demand, oversupply and tight credit conditions continue to cast a shadow on prices.
Iron ore futures for May delivery on the Dalian Commodity Exchange fell 0.42 percent to 474 yuan ($76) a tonne on Friday, while the most-traded May rebar contract on the Shanghai Futures Exchange was down 0.16 percent at 2,480 yuan a tonne.
Both contracts are on track to fall over 3 percent for the week, marking their steepest weekly percentage decline in six weeks, as demand worries returned to the fore on the back of weak economic data. However, analysts said the narrower price falls towards the latter half of this week suggest the market was stabilising and prices could see a mild rebound should Beijing roll out any supporting policies.
Local media re-circulated reports that the Chinese central bank plans to temporarily waive a requirement for banks to set aside reserves for some deposits, aiming to boost lending amid a slowdown in the world's second-largest economy. "If the central bank eases the loan-deposit ratio, it will provide a fresh boost to the housing market and encourage steel traders to replenish inventories," said Yu Yang, an analyst at Shenyin Wanguo Futures. However, analysts cautioned that any price rally would be limited as liquidity will remain tight for mills as well as steel and iron ore traders as banks are cautious about lending to these debt-laden sectors.
Global iron ore prices have been in a steady decline since the start of the year and is on track to post a 50 percent drop in 2014, as millions of tonnes of new mine supplies struggle to find buyers in China. Data released earlier this month showed growth in China's real estate investment slowed further in the first 11 months of 2014, although a rebound in property sales suggests the sector may be bottoming out. With the pace of recovery in the property sector looking uncertain, traders said the raft of recently-approved infrastructure projects in the country's western regions will be the key drivers for China's steel and iron ore demand next year.
Beijing on Thursday said a total of 33 infrastructure projects, worth a total investment of 835.3 billion yuan ($134.58 billion), have kicked off in 2014 in the western and border regions. The figures compare with a total spending of 326.5 billion yuan on 20 projects in 2013, according to a report by the National Development and Reform Commission.
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