Reuters reported that spot iron ore prices slipped to near their lowest levels for the year reflecting slow buying interest from top consumer China where demand growth for steel is being curbed by a tepid economic recovery.

Iron ore at below USD 130 per tonne is 19% off this year's peak and potentially has more downside potential as the market also braces for more supply in the H2 of the year.

According to data provider Steel Index, Benchmark 62% grade iron ore .IO62-CNI=SI dropped 20 cents to USD 129.40 per tonne. The price hit a low of USD 128.10 in early May its weakest since mid December.

An iron ore trader in China's eastern Shandong province said that most steel mills are staying away from the spot iron ore market because we haven't really seen any meaningful recovery in steel demand. We're not buying at the moment.

The trader's company only has around 30,000 tonnes of iron ore stocks, about a tenth of its usual inventories. Industrial production data out of China on Monday showed less than forecast growth in factory output for April, the latest sign that the nascent recovery in the world's No. 2 economy may be stalling.

Other manufacturing data has also come in below market expectations fanning concern China's economy may slow again in the second quarter after growth cooled to 7.7% in January to March. That is pressuring steel consumption which usually peaks in the second quarter.

Chinese mills producing steel at record rates, hoping demand would catch up, have weighed on prices and some producers may be forced to cut output. The most traded rebar contract for October delivery on the Shanghai Futures Exchange was down 0.9% at CNY 3,622 per tonne.

Rebar used in construction has fallen 17% from this year's peak of CNY 4,382 hit in early February. Iron ore is also under pressure from additional supply with top miners on course to lift output. Rio Tinto is slated to increase its annual production capacity to 290 million tonnes by the third quarter from 237 million tonnes currently.

Mr Jamie Pearce head of iron ore broking at SSY Futures said that "Everyone's bearish on the H2 of the year with added supply coming online. I think for the next couple of months, prices are going to trade within a fairly tight range."