SINGAPORE: Spot iron ore prices slipped to three-month lows below $170 in slow trading with top market China shut for a public holiday and participants unsure whether steel mills will resume buying the raw material next week, traders said on Thursday.
Iron ore with 62 percent iron content fell 1 percent to $169.60 a tonne on Wednesday, the lowest since July 6, according to Steel Index.
Spot prices have been steady earlier in the week with China on a public holiday all week, and most traders and brokers also away.
"There's some activity going on, it's not like the entire market can go to sleep. But it's a very thin market and the price drop reflects expectations that prices will fall further," said an iron ore trader in Singapore.
Prices of 11 out of the 27 forward swap contracts cleared by the Singapore Exchange extended recent losses, with investors uncertain whether steel prices in China will rebound when trading resumes next Monday.
Signs of slower steel demand in China, the world's biggest consumer and producer, drove Shanghai rebar futures down more than 11 percent in September, their biggest monthly loss ever.
"Steel prices in China remain weak and under pressure from rising inventories. Several mills are rumoured to be considering reducing production over the coming weeks," Steel Index said in a report.
"However, many smaller producers of construction steel remain profitable even at current prices, and may continue to produce unless steel prices come down further."
The steep drop in steel prices slashed the appetite for iron ore, the key steelmaking ingredient, causing spot prices to drop around 5 percent last month.
"People are positioning themselves for the uncertainty over whether the Chinese will come back and buy iron ore next week. People on the short side probably want to reduce their risk," said a Singapore-based iron ore derivatives trader, on the losses in swaps.
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