* At 5-month low, ore may drop below $100/T, traders say
* Oversupply of iron ore in spot market
* Spot steel prices in China extend decline
By Manolo Serapio Jr
SINGAPORE, May 21 (Reuters) - Sellers of imported iron ore in China slashed price offers further on Monday as weak demand continued to weigh on spot steel prices, opening more downside room for iron ore after a fall of nearly 5 percent last week.
Some steel mills in China, the world's biggest buyers of iron ore, have delayed delivery of shipments from miners on thin
demand and expectations prices, already at five-month lows,could fall some more.
Price offers for cargoes from Australia, Brazil, India and other origins fell for the fourth time in five days on Monday,slipping by as much as $2 per tonne, according to Chinese consultancy Umetal.
"There's an oversupply of iron ore, and on the other side you have very weak demand. It's very ugly out there," said a Singapore-based physical iron ore trader.
Supplies of iron ore from top exporters Australia and Brazil are bouncing back after disruptions due to bad weather in the first quarter. But the increased supply is coming at a time when Chinese demand is slowing along with its overall economy. Prices could eventually be at risk of falling below $100 a tonne, traders say, a level last seen in late 2009.
Benchmark iron ore with 62-percent iron content .IO62-CNI=SI fell 1.7 percent to $131.30 a tonne on Friday, a level last seen on Dec. 19, 2011, based on data from Steel Index. Friday marked the commodity's ninth straight day of losses, its longest losing streak since February.
The last time iron ore was in similar territory was last October when the price hit as low as $116.90, the weakest since December 2009, as soft steel demand forced Chinese mills to curb output.
"The ingredients are looking much worse this time given the oversupply, so I wouldn't rule out prices hitting $100 or even breaking $100," said the Singapore trader.
Before its descent, iron ore hit this year's high of $149.40 in mid-April as traders bet on a seasonal uptick in steel demand in the current quarter that has not come.
Top miner Vale, which is estimated to have sold 500,000-600,000 tonnes of iron ore in the spot market last week, is selling another 171,000 tonnes of 63.75-percent grade fines at a tender on Monday, traders said.
"Everybody now expects prices to go further down. If I were a steel mill, I would just buy a small volume, or buy from port stocks which are cheaper," said a trader in Shanghai.
The sustained decline in steel prices has been fueling iron ore's slump.
The price of steel billet in the key Tangshan area in Hebei province, China's top steel producing region, fell to 3,580 yuan ($570) a tonne over the weekend, said the Shanghai trader, down more than 200 yuan from late March.
"Billet could fall another 10-20 yuan today, and this will put more pressure on the iron ore market," the Shanghai trader said.
Construction of many high-speed railway projects across China, big users of steel, has almost stopped due to lack of funds, said an iron ore trader in the port city of Rizhao in China's Shandong province.
The most-active rebar contract for October delivery on the Shanghai Futures Exchange fell for a fifth straight week last week. It rose 0.4 percent to close at 4,090 yuan a tonne on Monday, tracking modest gains in equities.
Shanghai rebar futures and iron ore indexes at 0703 GMT
Contract Last Change Pct Change
SHFE REBAR OCT2 4090 +16.00 +0.39
PLATTS 62 PCT INDEX 134.25 -1.00 -0.74
THE STEEL INDEX 62 PCT INDEX 131.3 -2.30 -1.72
METAL BULLETIN INDEX 132.64 -1.69 -1.26
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3284 Chinese yuan)