Both domestic and imported iron ore prices will remain under downward pressure over November and December as steel mills enter the seasonal winter low production period, market sources said Friday.

"Winter is coming, which will drag down steel demand in China further, and iron ore prices will probably decline on waning buying enthusiasm from Chinese steel mills as a result [from this month]," a mining official in northern China said.

Beijing saw its first snowfall of the year Friday.

China's iron ore miners have been monitoring import price movements closely this year and routinely adjusting their prices to remain competitive, but their room to maneuver has been crunched to Yuan 5-10/dmt(80 cents-$1.60/dmt) since August when domestic concentrate prices hit Yuan 550/dmt, close to or below their cost of production.

"China's steel output will most probably decline with the demand going into the low season," the China Iron and Steel Association or CISA said in a monthly report released Wednesday.

A fall in inventories of iron ore both at steelworks and ports has failed to ease the oversupply situation in China and done little to support iron ore prices as a result, CISA said.

Iron ore inventories at 26 steel mills surveyed by CISA totaled 22.62 million mt at end October, down 6% month on month, while imported iron ore inventories at Chinese ports fell 1.3% over the same period to 84.45 million mt, it said.

Despite this, China's iron ore prices have been on a decline since October, with import prices falling 11% and domestic prices falling 2% over the month, CISA said.

With many of the country's steel mills already operating at a loss, buying interest for iron ore will be weak for the rest of the year, CISA said. Its member steel mills posted a loss of Yuan 28 billion ($4.4 billion) on steel sales over January-September, it added.

"Chinese steel mills have been in a dilemma as they need to keep producing and selling steel to guarantee credit from banks but on the other hand, the more they produce the more they will lose with worsening steel oversupply amid weakening demand," an official at privately-owned steel mill in Hebei in northern China said this week.

The forecast year-end price decline appears to have already begun, with Platts 62% Fe IODEX assessment falling steadily since Monday to be assessed at $47.80/dmt CFR North China Thursday, down $2.10/dmt over the first four trading days of November.