"China's iron ore inventory at harbours and enterprises has reached 89 million tonnes, which is at saturation levels," said Luo Bingsheng, vice chairman of the China Iron and Steel Association, according to the Securities Times.

"The situation will prompt Chinese steelmakers to cut iron ore imports to reduce procurement costs," he said.

Analysts said iron ore prices were likely to be lower in annual price negotiations next year between Chinese buyers and world iron ore producers, the report said.

That would mark the first price drop in nine years, due largely to production cuts by the world's major steel plants including Chinese producers, it said.

Leading Chinese producer Baosteel has followed other steel firms in reducing output, a report by the China Securities Journal said.

The company has postponed the reopening of a furnace -- closed for maintenance -- with an annual capacity of five million tonnes, it said.

It is also likely to shut down another furnace with a production capacity of 1.5 million tonnes of pig iron a year, the report added.

The steel industry booked a loss of 1.2 billion yuan (176 million dollars) in the first nine months, 18 times the loss seen over the same period in 2007, due to shrinking demand from the real estate and auto sectors, it said.

China's economic boom and the country's resulting need for raw materials has been a major factor in driving up prices of iron ore and other such materials worldwide in recent years.

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