Iron Ore-Spot at 3-week low

Iron Ore-Spot at 3-week low

* Iron ore has lost over 11 pct in 6 days
* Weaker steel demand limiting Chinese buying interest

Offer prices for iron ore fell further on Wednesday as spot rates dropped to three-week lows with steelmakers in top producer China largely staying out of the market amid thin demand.

Iron ore with 62 percent iron content dropped 0.9 percent to $130.80 a tonne on Tuesday, said the Steel Index , the lowest since Nov. 8. Iron ore has lost more than 11 percent in the last six consecutive trading days, trimming this month's gain to 10.5 percent. A 14-day rally earlier this month saw prices surging more than 26 percent after a slump in September and October.

"The buying activity from steel mills has been falling this week and I don't see any improvement in the iron ore market till the end of this year since demand for steel, particularly from the construction sector, is shrinking sharply," said an iron ore trader in Tangshan city in Hebei province, China's top steel producing region.

"The overall market is worried about the European debt crisis." The most-traded rebars contracts on the Shanghai Futures Exchange fell 1.2 percent to 2 percent/tonne, tracking weakness in other commodities spurred by the lack of bolder measures to resolve a two-year-old sovereign debt crisis in Europe.

Euro zone ministers agreed to ramp up the firepower of their rescue fund and may turn to the International Monetary Fund for more help as a stunning leap in Italy's borrowing costs pushed the region closer to financial disaster. "The situation in Europe and the world has significantly worsened over the past few weeks. Market stress has intensified," said Christian Noyer, France's central bank governor and a governing council member of the European Central Bank.

"We are now looking at a true financial crisis -- that is a broad-based disruption in financial markets," he said at a conference in Singapore. Amid thin demand, sellers cut prices of iron ore cargoes further, with Australian Pilbara fines down a dollar to $131-$133 a tonne and Newman fines $2 lower at $135-$137 a tonne, said Chinese consultancy Umetal. "Some traders are worried that iron ore prices will be very likely to fall further, so they have started selling more at lower prices," said an iron ore trader in China's eastern Shandong province. "But this isn't large-scale activity as the buying remains weak," he added.

But Steel Index said with spot steel and billet prices in China edging up this week, some mills in Hebei may return to the market next week to replenish their iron ore stockpiles.