SINGAPORE, Nov 11 (Reuters) - Citigroup has slashed its iron ore price forecast for 2015, predicting the steelmaking ingredient could drop below $60 per tonne in the most bearish estimate yet from a financial institution on the glut-hit commodity.

"We expect renewed supply growth to once again drive the market lower in 2015, combined with further demand weakness," the U.S. investment bank said in a report on Tuesday.

Prices have tumbled more than 40 percent this year on massive oversupply and worries over appetite in key buyer China.

Citigroup expects iron ore to average $60 a tonne in the third quarter of next year, down from a previous forecast of $78 and to briefly dip below $60 during that period.

It sees iron ore averaging $65 per tonne in both 2015 and 2016, down from an estimated $98 this year.

A ramp-up in output by top, low-cost producers at a time when demand growth in top iron ore buyer China was slowing has driven prices to five-year lows. At $75.50 per tonne , iron ore has lost nearly 44 percent this year, the hardest hit among industrial commodities.

Citigroup's revision follows downgrades by other financial institutions.

ANZ Bank on Monday cut its 2015 iron ore forecast to $78 a tonne from $101, and its 2016 estimate to $85 from $95. Morgan Stanley and Goldman Sachs have put their 2015 forecasts at $87 and $80 respectively.

At below $60 a tonne for iron ore, margins for even low-cost producers would get thinner. Australia's Rio Tinto, the world's No. 2 iron ore miner, had the lowest cash cost in the industry at $20.40 a tonne in the first half of 2014.

Sustained prices at $60-levels would be needed to curtail production outside China, Citigroup said, adding that Chinese iron ore output would need to fall further.

"We find only modest cutbacks are likely if iron ore remains in the $70s, with sustained prices in the $60s needed to prompt significant cutbacks," it said.

(Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)