Reuters reported that Chinese iron ore futures fell 1% to their lowest since the contracts were launched in October as weaker steel prices curbed demand for the raw material.

Spot iron ore dropped to its cheapest in more than five months on Friday and could ease further below USD 130 per tonne this week as cautious traders keep their hands off fresh cargoes, with demand seen unlikely to perk up until after the Chinese New Year.

The most active iron ore contract on the Dalian Commodity Exchange, for May delivery, hit a session low of CNY 868 per tonne, its weakest since it was introduced on October 18th 2013. It closed down 0.7% at CNY 871.

A Shanghai based iron ore trader said that we're not buying iron ore for now. It would be difficult to sell a cargo at the moment so we'll wait until after the Chinese New Year and see how the market goes.

Most mills are cautious about the market for steel products and secondly, they have problems with tighter liquidity. In past years, Chinese mills have usually stocked up on iron ore ahead of the week-long Lunar New Year break, which starts on January 31 this year. But a softer steel market had curbed buying interest this year.

The most-traded May rebar contract on the Shanghai Futures Exchange declined to as low as CNY 3,449 per tonne, not far off Friday's trough of CNY 3,441 the lowest since the contracts were launched in 2009.

Rebar, a steel product used in construction, settled 0.3% lower at CNY 3,462 falling in six out of seven sessions. Slower Chinese demand has weighed on spot iron ore prices, adding to last year's more than 7% drop.

Australia and New Zealand Banking Group said that current prices have encouraged some restocking activity from smaller mills but we suspect prices may fall towards USD 125 per tonne in the short term, as weaker Chinese construction activity and high at-port inventories weigh on prices.