Spot iron ore prices fell for the seventh straight session and were poised to post their biggest weekly drop since early September as steel mills in top consumer China restricted purchases on tight cash flows and weak steel prices.

Faltering steel demand in the winter season as construction activities slow down have curbed mills' buying interest of the raw material. Some mills are also facing tight credit conditions as banks step up collection of dues before the year end.

Mr Yang Jun, a trader with Shanghai Sinom Import & Export Co Ltd said that "Some mills are starting to reduce their inventories to beef up liquidity at the year end when cash flow is normally an issue as banks are taking back loans.”

Further, China's money markets began tightening on Wednesday and spiked on Thursday when the central bank abstained from injecting cash to ease shortages, similar to a massive credit squeeze in China that roiled global markets in June.