Iron ore dropped to its lowest in almost eight months on soft demand from top importer China with some steel producers, fearing a further decline in prices, selling some contracted cargoes back into the spot market.
Iron ore has lost 12.2 percent this year, exceeding a 7.4 percent decline in 2013, and risks losing more ground as global supply grows faster than Chinese appetite for the steelmaking raw material.
"Some mills in southern China are trying to sell part of their cargoes under long-term contracts that have yet to be delivered because they have more than enough at the moment," said an iron ore trader in Shanghai.
Tighter liquidity and slow steel demand tend to force some Chinese mills to sell iron ore cargoes back into the market, aiming to turn stockpiles into cash before spot prices drop further.
Concerns over the outlook for China grew this week as local media reports of tighter lending conditions were followed by a steep drop in the yuan, in an apparent move by the central bank to add volatility to the currency in preparation for reform.
The yuan fell below the official fixing for a third straight day on Thursday.
Beijing holds its annual parliamentary meeting next week.
Benchmark 62-percent grade iron ore for immediate delivery to China fell 1.1 percent to $117.80 a tonne on Wednesday, its lowest since July 1, according to data compiler Steel Index.
It marked iron ore's sixth straight day of decline – its longest losing streak since December. Prices have shed more than 5 percent over the latest six sessions.
"I think the market's still in a bearish situation and I personally feel that the price has a chance to touch $100 or a bit lower than that," said the trader.
Global miner Rio Tinto is offering another cargo of Australian 61-percent grade Pilbara iron ore fines at a tender on Thursday after selling a same-grade cargo at $118.11 a tonne on Wednesday, traders said, down about $4 from the sale price of a similar grade in a Chinese trading platform last week.
A slide in Chinese steel prices has fuelled iron ore's descent, with Shanghai rebar futures reaching all-time lows this week.
On Thursday, the most-traded rebar for delivery in May on the Shanghai Futures Exchange edged up 0.8 percent to 3,340 yuan ($550) a tonne, after a six-day fall that included a drop to a low of 3,295 yuan on Tuesday.
China's excessive steel capacity also makes it difficult for prices to stage any sustained recovery.
A vow by China to ban new steel projects until 2017 will help to relieve oversupply in the bloated sector but the policy will take time to have an effect, Hebei Iron and Steel Group, China's top steelmaker said on Wednesday.
At the Dalian Commodity Exchange, iron ore for May delivery gained nearly 1 percent to 824 yuan a tonne, also snapping a six-day drop.