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PrintSpot iron ore prices fell below $130 a tonne to the lowest level in six months as a sluggish outlook for steel demand limited appetite from Chinese mills most of which are well stocked in the raw material after recent hefty imports.
The price of iron ore, China's top commodity import by volume and the biggest earner for global miners such as Vale and Rio Tinto, could slip further amid modest restocking demand from steel producers ahead of the Lunar New Year break that starts in late January.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI fell 1.1 percent to 129.50 a tonne on Tuesday, its cheapest since July 16, according to data compiler Steel Index.
The commodity's last brush with below-$130 level was in early August after which it quickly rebounded to a high of $142.80 in the middle of that month as the price drop and a firmer steel market drew buyers back.
But a similar price revival is unlikely this time, traders said.
"Downstream demand for steel is bad and spot billet prices are weakening. We are still considering whether we should buy cargo for February or March because we're not sure if prices will rebound or fall further," said an iron ore trader in China's eastern Shandong province.
"We still have 90,000 tonnes and we want to sell some before the (Lunar New Year) holiday but it's difficult to sell it even if we're doing it at a loss," said the trader, adding the average cost for the cargoes was around $137 a tonne.
Iron ore prices have fallen in six of the past seven days and are down 3.5 percent so far this month, a weak start to a year when supply is bound to get bigger as miners expand capacities while Chinese demand is seen growing slower.
China's iron ore imports fell nearly 6 percent in December from a record high of 77.84 million tonnes the previous month, and the country's crude steel output is forecast to grow at a slower pace of around 3 percent this year.
"With mills reporting ample inventory cover, nearing 45 days, we expect buying to remain light and some further downside in spot prices," Australia and New Zealand Banking Group said in a note.
Prices may find support at between $125 and $127, according to the Shandong trader and a trader in Shanghai, levels which could lure back some buyers.
The most-traded rebar for May delivery on the Shanghai Futures Exchange was up 0.1 percent at 3,485 yuan ($580) a tonne by midday on Wednesday, still not far above a record low of 3,441 yuan touched on Friday.
Construction-used rebar has lost 2.5 percent so far in January, after sliding almost 16 percent in all of 2013.
At the Dalian Commodity Exchange, the most-active May iron ore contract was up 0.3 percent at 877 yuan a tonne. It fell to as low as 866 yuan on Tuesday, its weakest since the contract was launched in October.
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