Chinese steel and iron ore futures finished nearly flat on Monday as optimism brought on by China's first interest rate cut in more than two years failed to sustain an early morning rally.
While the rate cut should support efforts by Beijing to shore up activity in the world's No. 2 economy, it is unlikely to have an immediate impact on China's steel sector as demand slows during winter.
"Rate cuts in China are likely to boost activity over the longer term, especially if these initial cuts turn out to the first in a series," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
"However, at this stage, cheaper borrowing rates will need to overcome the natural caution that flows through an economy when the property market is oversupplied and housing prices are falling."
Iron ore for May delivery on the Dalian Commodity Exchange closed 0.2 percent lower at 470 yuan ($77) a tonne, after hitting a session high of 482 yuan.
The most-traded May rebar contract on the Shanghai Futures Exchange closed little changed at 2,437 yuan a tonne, after rising as high as 2,479 yuan.
The boost from China's rate cut on other commodities also appeared fleeting, with oil prices off session highs and base metals trading lower.
Spot iron ore prices fell below $70 a tonne on Friday for the first time since June 2009, extending this year's rout that has slashed prices by 48 percent amid a well supplied market.
Benchmark 62-percent grade iron ore for delivery to China's Tianjin port .IO62-CNI=SI slipped 0.3 percent to $69.80 a tonne, according to data compiled by The Steel Index.
The price dropped 7.6 percent last week, its deepest weekly decline since losing more than 10 percent in May last year.
Iron ore futures on the Singapore Exchange also weakened on Monday, with the January contract trading just above $70 a tonne.
While the rate cut might provide some initial support to commodities, ANZ Bank said China's "weak domestic demand and tight credit conditions will likely continue to weigh on sentiment." Rebar and iron ore prices at 0713 GMT Contract Last Change Pct Change SHFE REBAR MAY5 2437 +1.00 +0.04 DALIAN IRON ORE DCE DCIO MAY5 470 -1.00 -0.21 SGX IRON ORE FUTURES DEC 70.76 -0.74 -1.03 THE STEEL INDEX 62 PCT INDEX 69.80 -0.20 -0.29 METAL BULLETIN INDEX 70.31 -0.66 -0.93 Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day (1 US dollar = 6.1361 Chinese yuan.
Source: Reuters
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