Australian miner Fortescue Metals Group, which sells the bulk of its iron ore to China, is among those looking at a recovery in Chinese steel demand next month, saying it sees iron ore prices rising in the near term.
The most-active May rebar contract on the Shanghai Futures Exchange dropped 0.3 percent to 4,238 yuan a tonne by the midday break, after falling as low as 4,214 yuan, a level not seen since Jan. 16.
Construction steel rebar, which bucked gains in other commodities, has lost 2.3 percent since last Thursday.
Slower Chinese steel demand has cut appetite for iron ore, with the benchmark 62-percent grade dropping for a sixth consecutive day on Tuesday down 1.8 percent to $139.60 a tonne, according to Steel Index, the lowest since Jan. 4.
Tuesday's drop also marked the steepest single-day percentage drop for iron ore since late November. But traders say the price drop should help revive buying interest in the raw material.
"I have a good handful of buyers, both traders and steel mills who are still looking for cargo, but at the end of the day it's always about the price," said a Singapore-based iron ore trader.
"Once you see the 62-grade dropping to around $135-$136, trust me there will be people buying. It's because at that price they can make money based on current steel prices."