Spot iron ore prices in physical market in China lost USD 1 per tonne further on Thursday nearing their weakest level since 2009 on slow demand from Chinese steel producers

However the May iron ore contract on the Dalian Commodity Exchange climbed 1.4 percent to CNY 503 a tonne.

With sufficient inventories amid a backdrop of tight credit conditions and weak steel prices, mills are in no hurry to restock. It is reported that many steel mills are planning to shut down for maintenance ahead of the holidays, further fuelling little need to build inventories.

Citigroup on Wednesday cut its iron ore price forecast for 2015 to USD 58 from USD 65, and sees it averaging as low as USD 53 in the third quarter, partly due to a decline in transportation costs amid falling energy prices.

This was followed by UBS Group AG on Thursday. Citing cheaper energy prices which are lowering the cost of mining and shipping rates, it said “Iron ore will average USD 66 a tonnes in 2015, 22% less than previously forecast and USD 65 in 2016, down 21%. The iron ore battle for market share will renew in 2015. Demand growth again looks likely to remain anaemic, outstripped by supply growth from the three majors, Minas-Rio and Roy Hill.”

UBS predicted that the global surplus will swell from 35 million tonnes in 2015 to more than 200 million tonnes by 2018 and that seaborne supply will expand 6.3% in 2015 as compared with demand growth of 4%