Iron ore prices will keep falling in China as steel production is to remain weak and supply of raw materials outstrips demand, the China Iron & Steel Association (CISA) said.

An iron ore price index compiled by the CISA declined 2.9% in September from a month earlier; the index for domestic and imported iron ore was down 1.2% and 3.4% respectively. The index rose in August.

Poor economic benefits and seasonal factors will cause lower steel production and hence weaker demand for iron ore, the CISA predicted.

Steelmakers tracked by the CISA posted a combined 8.1 billion yuan profit in the first 8 months of 2013, with a mere 0.34% profit margin, the lowest in all industries in China.

Domestic steel prices stopped rising in September, ending the upward trend in the previous 2 months, the CISA said.

However, iron ore supply is increasing. In the first 8 months China's iron ore output increased by 7.16 million tons and imports increased by 40.21 million tons, according to the National Bureau of Statistics. Those amounts combined is well above the increment in demand for iron ore.

The CISA suggested Chinese steel mills buy less iron ore from long-term contract while buy more from the spot market to break up the pricing monopoly created by leading iron ore producers.

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