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PrintChinese iron ore futures fell for a seventh straight session on Tuesday and spot prices dropped to near three-week lows as a sluggish steel market kept buyers of the raw material scarce.
Dalian iron ore futures touched their weakest level since their mid-October debut as steel prices in Shanghai hovered near their lowest in four months.
"Mills are not buying because they are very well stocked at the moment. Some miners have been asking them to take on additional tonnage under their long-term contracts but mills are not very keen," said a physical iron ore trader in Hong Kong.
The most-traded 62-percent grade iron ore contract for May delivery on the Dalian Commodity Exchange was down half a percent at 917 yuan ($150) a tonne by 0313 GMT. The price includes China's value-added tax, port charges and other fees.
The contract fell to 913 yuan, the lowest level since its launch on Oct. 18. It hit a high of 984 yuan on its debut but has dropped steadily since.
Iron ore for immediate delivery on China's Tianjin port.IO62-CNI=SI fell 1.1 percent to $131.80 a tonne on Monday, a level unseen since Oct. 9, according to data compiled by the Steel Index.
"We could see prices below $130 by next week. The market is slowly trending downwards," the Hong Kong trader said.
Global miners such as Rio Tinto and BHP Billiton are continuously expanding production, hoping Chinese demand for their top-earning commodity will remain firm.
But supply is bound to far outpace demand as Beijing aims for a slower, more sustainable economic growth model driven by consumption rather than steel-intensive investments.
BHP is selling 70,000 tonnes of Australian Yandi iron ore fines with iron content of around 58 percent at a tender closing later on Tuesday, with traders expecting the cargo to be sold at less than $123 a tonne.
China's daily crude steel output dropped to 2.107 million tonnes in mid-October from 2.152 million tonnes in late September, according to estimates by the China Iron and Steel Association.
The production cuts may have been fuelled by weaker steel prices and a further reduction may happen before and during China's Communist Party meeting in November, said Helen Lau,senior mining analyst at UOB Kay Hian Securities.
"If that is the case, we may see some increase in steel prices. But given the view that the steel sector is still in structural overcapacity, we take any share price recovery on back of short-term steel price increase as a chance to sell,"
Lau said in a note, referring to the brokerage's "sell" rating on Chinese steelmakers Angang Steel and Maanshan Iron and Steel.
The most-active May rebar contract on the Shanghai Futures Exchange touched a session low of 3,576 yuan a tonne, near Monday's trough of 3,575 yuan which was the lowest since June 27.
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