Iron ore prices have fallen to their lowest point in two months, extending this week's decline as increased supply and seasonally weak steel demand weigh on market sentiment.

During early Asian trading on Thursday, iron ore futures dropped 1.1% to $102.50 per ton, reaching their lowest intraday level since April 14th and on track for their weakest closing price since March.

Global iron ore shipments are growing while summer steel demand remains relatively soft. Concurrently, a strong rally in coking coal prices is beginning to squeeze steelmaking profit margins, which in turn is negatively impacting iron ore prices.

The chief researcher at CITIC Futures, Yu Dian, stated that higher coking coal prices imply that "iron ore prices need a round of correction to restore the profit balance for steel mills."

A decline in oil prices could also lead to lower freight costs, thereby weakening a key factor that has supported iron ore prices since the outbreak of conflict in the Middle East.

Notably, RBC Capital Markets downgraded its rating on Rio Tinto Ltd (ASX: RIO) from "Sector Perform" to "Underperform," while raising its price target from 6300 pence to 6400 pence. This move is based on an expectation that iron ore prices will continue to fall, reaching $85 per ton by the end of 2027.

RBC indicated that this rating downgrade reflects its outlook for the commodity's prospects and concerns that weaker iron ore prices will drag on Rio Tinto's earnings and cash flow.