* Down 26 pct from year-ago, iron ore seen falling further
* China steel demand may not recover before Aug/Sept-trader
By Manolo Serapio Jr
SINGAPORE, July 19 (Reuters) - China steel futures sagged to a contract low on Thursday as demand in the world's top consumer showed no signs of recovery, dragging down spot iron ore prices to the weakest since November.
Iron ore is now down 26 percent from a year ago, but traders said buyers are still not biting, convinced prices would fall further with Chinese mills likely to curb output some more.
"If you throw some cargoes in the market nobody's willing to buy, nobody's even willing to think about buying," said a physical iron ore trader in Shanghai.
"With prices going down the way they are, who wants to take a chance? There's absolutely little hope."
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI fell for a sixth straight day on Wednesday, to $128.30 a tonne, the lowest since Nov. 8, based on data from Steel Index.
The Shanghai trader said the price could fall by another $5, and sees $120 as a floor.
The last time iron ore prices fell below $120 was late last year -- dropping to a low of $116.90 in October -- the lowest since December 2009. The price slide, fueled by a decline in steel prices, prompted Chinese mills to seek delays of shipments from miners and to move contract pricing even closer to daily spot rates.
But iron ore's Wednesday losses may well extend as the most-traded January Shanghai rebar futures hit a contract low of 3,824 yuan ($600) a tonne on Thursday.
Since the January contract became the most active last week, the price has set a contract low in seven sessions.
Spot steel prices have similarly dropped, with steel billet in China's key Tangshan area at 3,460 yuan per tonne on Wednesday, down more than 3 percent from last week.
China's slowing economy, which grew at its weakest pace in three years in the second quarter, along with a seasonal lull in demand during the summer months have pressured steel prices, prompting mills to curb output.
China's daily crude steel output averaged 1.958 million tonnes in the first 10 days of July, down 0.4 percent from the preceding 10-day period, industry data showed this week.
"I don't think any steel mill today can buy iron ore at current prices and make money. The steel market is so bad. I don't see any recovery in demand before late August or
September," said another trader in Shanghai.
Stockpiles of five major steel products in China, including rebar and hot-rolled coil, held by traders had been steady between 15.4-15.6 million tonnes since June, according to data compiled by Bank of America-Merrill Lynch.
They are down about 18 percent from this year's peak of 19 million tonnes, although stockpiles have fallen by a much faster 24 percent during the same period in 2011, based on the data.
Shanghai rebar futures and iron ore indexes at 0439 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3837 -27.00 -0.70
PLATTS 62 PCT INDEX 128.5 -1.50 -1.15
THE STEEL INDEX 62 PCT INDEX 128.3 -1.10 -0.85
METAL BULLETIN INDEX 129.08 -1.81 -1.38
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3702 Chinese yuan)