Iron ore prices, hit by weak steel demand in China, will continue to suffer as Europe slides back into recession.
Prices remained depressed this week, with sluggish demand from China providing no impetus for a rally.
The Asian economic powerhouse has showed signs of a slowdown, and the resultant drop in steel demand has reduced demand for iron ore, a component of steel.
"Buying interest has been absolutely zero," an iron ore trader based in Shanghai told Reuters on Wednesday. "Selling has become increasingly difficult given the recent fall in steel prices."
The benchmark 62 per cent grade iron ore steadied this week at US$146.70 per tonne, a one-month low, according to data by the Steel Index.
China's first-quarter economic growth was the slowest in almost three years, but steel production at least remained above the 2 million tonnes-per-day threshold, according to the China Iron and Steel Association.
Europe's economic travails are likely to hold back any recovery in the global iron ore market.
"The main factor so far has been China, as the year progresses that will switch to Europe," said Ross Strachan, a metals analyst at Capital Economics. Europe's purchasing managers index for manufacturing declined to the lowest levels in almost three years, and Capital Economics forecasts iron ore will fall to $125 a tonne by the end of the year.
"This is a significant drop from the current situation, and the weakness in demand is very much the key to that," said Mr Strachan.
China's demand slump has affected miners' earnings, with Brazil's Vale, the worlds biggest producer of iron ore, recording a strong earnings decline in the first quarter.
Vale's first-quarter profit declined by more than 40 per cent to $3.8 billion, a third consecutive quarterly drop.
Analysts expect mining companies will continue to find their earnings depressed by low prices.
"As the year goes on, this is increasingly likely," said Mr Strachan.