Iron ore dropped to its lowest level in eight months amid lean appetites from Chinese steel mills who are anticipating a further decline in prices in the absence of a pickup in steel demand.
Citigroup slashed its forecast for iron ore for this year and the next two years, expecting prices to fall to a low of $80 a tonne in 2016 as global supplies grow.
Iron ore of 62-percent grade for immediate delivery to China .IO62-CNI=SI eased 0.3 percent to $117.70 a tonne on Monday, its lowest since July 1, according to data compiler Steel Index.
"There's not too much demand coming from the market. Steel consumption is slow and liquidity is tight," said an iron ore trader in Shanghai.
"Buyers are still not confident about prices and they expect a further drop," he said, adding he sees iron ore falling another $5-$10 a tonne.
An Australian cargo of 61-percent grade Pilbara iron ore fines was sold at $117.25 a tonne in a tender on Monday, lower than a previous sale at $117.58 last week, traders said.
Citigroup has cut its price forecast for this year to $113 a tonne from an earlier estimate of $120. The bank sees the price slipping to $90 in 2015 and $80 in 2016, lower than its previous projections of $100 and $90 respectively.
"With 2014 and 2015 facing seemingly inescapable market surpluses, the question becomes the price needed to force sufficient production curtailments to bring the market back into balance in 2016," Citi said in a report.
While the depth of that price depends on demand growth, especially from top importer China, Citi said its analysis indicated a yearly average of $70-$90/tonne was needed to spark curbs to output.
Weakness in the steel market has cut interest in spot seaborne iron ore cargoes, and while market participants anticipate a seasonal pickup in demand along with construction work this month, prices have fallen further.
Rebar for May delivery on the Shanghai Futures Exchange hit a session low of 3,288 yuan ($530) a tonne, the weakest for the contract since the bourse launched rebar futures in March 2009. It closed down 3 yuan at 3,310 yuan.
The most-traded rebar contract for delivery in October was off 0.2 percent at 3,409 yuan per tonne.
At the Dalian Commodity Exchange, the iron ore May contract rose 0.4 percent to close at 812 yuan a tonne.
Shanghai rebar futures and iron ore indexes at 0734 GMT Contract Last Change Pct Change SHFE REBAR MAY4 3310 -3.00 -0.09 DALIAN IRON ORE MAY4 812 +3.00 +0.37 THE STEEL INDEX 62 PCT INDEX 117.7 -0.40 -0.34 METAL BULLETIN INDEX 118.06 -0.08 -0.07 Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day.