Tue Jul 24, 2012, SHANGHAI, July 24 (Reuters) - Spot prices for iron ore delivered to China fell to an eight-month low on Tuesday and are likely to fall further as there are few signs that demand for steel is likely to pick up soon, traders said.
Chinese buyers remain bearish about the prospects for the steel-making raw material, saying there are few signs that steel demand will recover even though data showed manufacturing output in the world's second-largest economy grew at its fastest pace in nine months in July.
"We put a brake on booking materials with our supplier recently, and we have one floating cargo which we are trying to sell, even at a loss," said an iron ore trader in Shanghai.
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI dropped 1.1 percent to $123.60 per tonne on Monday, its lowest since November 4, according to data from the Steel Index.
"It seems prices are on track to break $120 per tonne soon, and we have more than 500,000 tonnes of materials on hand but are struggling to find a buyer," said another iron ore trader in Shanghai.
Some traders expect iron ore prices to drop to $115 per tonne, a level unseen since October 2011, over the next few weeks amid ballooning inventories and tepid demand.
"The market is too fragile, and we will try to sell as long as we can secure deals. Prices will continue to fall this week, and few traders will stock materials even if they believe prices hit the bottom as they are concerned about the sluggish economy," said a trader in Shandong province.
The HSBC Flash China manufacturing purchasing managers index (PMI) rose to 49.5 in July from 48.2 in June, rising close to the 50 level that divides expansion from contraction.
The PMI signals that a sequential improvement in the economy in the second quarter may be broadening as pro-growth government policies gain traction. The index, however, has been below 50 for nine straight months, showing a need for those policies to remain in place.
The most-active rebar contract for January delivery on the Shanghai Futures Exchange rose 0.41 percent to 3,709 yuan ($580) per tonne by the close.
It still hovered near a record low of 3,652 yuan per tonne touched on Monday.