Sellers of spot iron ore cargoes to top importer China cut prices further on Monday, pointing to more downside pressure for the commodity that slid nearly 13 percent last month as Chinese steel demand soured.
But iron ore, which hit a 2-1/2 year trough of $115.20 per tonne last week, is unlikely to fall below $110, traders say, as some Chinese mills could pick up cargoes to replenish run-down stocks.
"At current levels, there are still some mills willing to take some cargoes because the lower prices mean they can reduce their losses from weaker steel prices or at least break even," said a shipping manager for an iron ore trading company in Shanghai. "I think it will be quite difficult to break $110 and the market could stabilise at current levels."
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI eased 0.3 percent to $116.70 per tonne on Friday, according to the Steel Index. It fell 7 percent last week, its biggest weekly drop since late October.
That may slip further on Monday as price offers for some iron ore cargoes in China, including from top supplier Australia, dropped by $1-$2 per tonne, based on data from Beijing-based consultancy Umetal.
A slump in Chinese steel prices, reflecting sluggish demand, has slashed appetites for raw material iron ore, forcing smaller producers in the world's biggest steel market to step up maintenance to curb output and losses.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange closed up 0.3 percent at 3,682 yuan ($580) per tonne, after hitting a contract low of 3,631 yuan on Friday.
Rebar, or reinforcing steel bar, used in construction, dropped almost 7 percent in July.
"I only expect steel demand to pick up from Septemberonwards since construction is still slow in China where the weather is hot in some places and it's raining in some parts," said a Shanghai-based physical iron ore trader, whose company has not bought any fresh iron ore shipments for the past month.
"We are not feeling very confident about the market yet. We are considering some offers but our management still feels the market is weak."
But miners continue to offer cargoes on the spot market. Top producer Vale SA is selling two Brazilian iron ore cargoes via tenders that close later on Monday, traders said.
One is 167,000 tonnes of 64.55-percent grade iron ore lumps and the other cargo is 156,000 tonnes of 62.62-percent grade sinter feed, traders said.
Vale last week sold 64.08-percent grade lumps at $122.10 per tonne, said the Shanghai shipping manager.
"I think that the last deal was on the high side. Today's cargo could be $115 or even lower," he said