Triggering reason for the dip has been recent hounding by the Chinese regulatory authorities of the rampant misuse of credit lines by the mills to import iron ore and using it has collateral to eke out credit from banks.

This tendency has led to highly inflated buying despite slow finished demand huge stockpiles at ports. Since 4 weeks back when the authorities set deadlines for the banks to come above board most of these mills have indulged in panic sales of volumes booked or stocked thereby leading to collapse in price levels.

The other important reason has been market worries that demand from China is being outpaced by increasing output of the steelmaking raw material from international miners.

Australian mining companies like BHP Billiton Ltd, Rio Tinto and Fortescue Metals Group Ltd. have poured billions of dollars into new mines or existing operations over the past few years as the value of industrial commodities soared to record levels in response to robust demand from China. The country is the world's largest buyer of iron ore, accounting for more than 60% of seaborne trade.

Rio Tinto already has committed to boosting annual iron-ore output in Australia by more than 20% over the next four years in a bet Chinese demand will stay strong. Fortescue Metals and BHP also are building up their production. Last week, Rio Tinto said its iron-ore mining operations in the Pilbara region, in the state of Western Australia, reached a production rate of 290 million metric tons a year, two months ahead of schedule.

Fortescue Metals recently hit its target of producing 155 million tons of iron ore on an annual basis, and thinks it could boost exports by a further 13% by mining more efficiently.

According to data from The Steel Index Ltd, iron ore with 62 percent content delivered to the Chinese port of Tianjin fell 2.2 percent to USD 98.50 a dry ton today, the lowest since Sept 13, 2012

The iron ore future contract for July settlement on the Singapore Exchange slid 1.1% to USD 97.90 per tonne the lowest level since April 2013. August futures declined 1 percent to USD 97.85. Prices for June fell 2.6% to USD 99.58 on May 16.

Iron ore futures on the Dalian Commodity Exchange touched a low of CNY 695 per tonne, the lowest since the contract was launched in October last year. It fell 1.1% to CNY 700 by close.

The trend is unlikely to be reversed soon since the finished steel demand remains sluggish and government is in overdrive to cut down capacities to rein in steel production. Ultimately these measures will bring down iron ore consumption.