Iron ore is on track to end September with its biggest monthly loss since May after falling to its lowest since 2009 in a rout that traders say looks likely to continue after a week-long holiday in top consumer China.

Abundant supply of iron ore has hit prices hard as the top global miners, looking to squeeze out high-cost producers, lifted output at a time when Chinese steel demand was slowing.

Third quarterly loss

The steelmaking raw material has fallen more than 42 per cent this year and is on course for its third quarterly decline.

There was limited trading activity in China ahead of the National Day holiday that starts on Wednesday, traders said.

"Most deals have been done yesterday and the days before, and other traders have really been shying away from the market in the past two months," said an iron ore trader in China's eastern Shandong province.

"Many traders are keeping low stocks because they don't think the price can find any strong support right now, given the weak real estate market in China," said the trader, who sees iron ore touching $70 in October. Ore for immediate delivery to China fell 1.2 per cent on Monday to $77.70 a tonne, its lowest since September 2009, according to data compiled by The Steel Index.

The price of the raw material, which is the top revenue earner for global miners Vale and Rio Tinto, has slumped nearly 12 per cent this month and 17 per cent in the third quarter. A cooling property sector has been a major drag on China's economy this year, with economists saying Beijing may need to launch more stimulus measures if the government is to meet its 2014 growth target of around 7.5 per cent.

China factory output

Activity in China's factory sector showed signs of steadying in September as export orders climbed, according to a private survey, easing fears of a hard landing but pointing to a still sluggish economy facing considerable risks. The HSBC/Markit Manufacturing Purchasing Managers' Index stood at 50.2 in September, unchanged from the August reading, which was a three-month low, but lower than the preliminary 50.5.

Chinese steel and iron ore futures rose modestly after sharp losses on Monday. The most traded January rebar contract on the Shanghai Futures Exchange was up 0.4 per cent at 2,552 yuan ($415) a tonne by midday after sliding more than 2 per cent in the previous session. Iron ore for January delivery on the Dalian Commodity Exchange edged up 0.4 per cent to 549 yuan per tonne after Monday's 3 per cent drop.

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