Iron ore prices hit lowest since 2009 as oversupply woes linger

* Spot iron ore has fallen nearly 40 pct this year

* Traders clearing ore stocks, mills buying hand to mouth-trader (Updates prices)

By Manolo Serapio Jr

SINGAPORE, Sept 11 (Reuters) - Iron ore prices fell on Thursday to their lowest since September 2009, extending a losing streak into a third day, amid abundant supply and slower growth in Chinese demand that have seen the steelmaking commodity lose nearly 40 percent in value this year.

The weaker steel market in China, the world's biggest consumer and producer, is also a major strain for iron ore, with slower consumption prompting steel mills to cut prices for next month.

Iron ore for immediate delivery to China fell 0.4 percent to $81.90 a tonne, according to data compiled by Steel Index. This is the eighth daily fall since the beginning of September.

Along with miners unloading cargoes in the spot market, Chinese traders are clearing their stocks at ports, piling further pressure on prices, traders said.

"Quite a few traders in Tangshan and Tianjin are clearing their port stocks, selling some cargoes at a loss as prices could fall some more," an iron ore trader in Shanghai said.

Most mills buying iron ore are doing so hand to mouth, choosing delivery dates that are closer to the time that they would need the material instead of stocking up ahead, he said.

Top miners Vale and Rio Tinto (Xetra: 855018 - news) sold cargoes at separate tenders on Thursday, traders said.

Vale, the world's biggest iron ore producer, sold 135,000 tonnes of 62.99 percent grade Brazilian iron ore and 77,000 tonnes of 64.49 percent grade material, they said.

Second-ranked Rio sold 170,000 tonnes of 61 percent grade Australian Pilbara iron ore fines.

The raw material is the biggest revenue earner for Vale and Rio.

SURPLUS

Morgan Stanley (Xetra: 885836 - news) has projected a global supply surplus of 79 million tonnes this year, 158 million tonnes in 2015 and 256 million tonnes in 2018.

"Recent price falls in iron ore do appear to be forcing higher-cost coastal Chinese mines to close, but others continue to shoulder losses and/or maintain financial support from provincial governments," Australia and New Zealand Banking Group said in a note.

Baoshan Iron and Steel, China's second-biggest steelmaker, said on Wednesday it will cut prices of its main products for October delivery by 100 yuan a tonne, after keeping them flat over the past three months.

"Our steel mill clients are telling us that they don't have enough orders for September and October so they're quite cautious in buying more iron ore," the Shanghai trader said.

Japanese trading house Mitsui & Co may miss the current year's profit target of $1.1 billion for its metals business due to the slump in iron ore, warned a senior executive, who said prices may fall to as low as $80 a tonne before rebounding.

Mitsui had an annual iron ore output of 51 million tonnes in the last business year to March 31 through its equity holdings in mines.

Iron ore for January delivery on the Dalian Commodity Exchange closed flat at 585 yuan ($95) a tonne, not far above a contract low of 570 yuan reached on Wednesday.

The most-traded rebar contract for January delivery on the Shanghai Futures Exchange fell 0.6 percent to 2,757 yuan a tonne. The contract touched a record low of 2,725 yuan in the previous session. (Editing by Muralikumar Anantharaman, Sunil Nair and Dale Hudson)