* Tangshan issues 2nd-level pollution alert
* China releases annual winter pollution plan
* Rio Tinto Q3 iron ore shipments rise 5% y/y
* China's steel sector fragmentation worsening
By Enrico Dela Cruz
MANILA, Oct 16 (Reuters) - Benchmark Dalian iron ore futures slumped in morning trade on Wednesday, extending losses into a third session, after China's top steelmaking city of Tangshan issued a second-level smog alert that requires mills to further limit operations.
The Dalian Commodity Exchange's DCIOcv1 most-traded iron ore contract, with January 2020 expiry, fell as much as 1.7% to 627 yuan a tonne, its weakest since Sept. 26, and was down 1.6% by noon break.
The losses widened further after China outlined its annual anti-pollution plan for winter in a document released by the Ministry of Ecology and Environment.
Tangshan's move means more drastic steel production restrictions, after the city ordered steelmakers last week to reduce sintering, pelletising and blast furnace operations from Oct. 10 until Oct. 31, a Shanghai-based trader said.
The latest emergency measures by Tangshan to address worsening air pollution were scheduled to take effect on Tuesday, according to local government-backed media, which did not say when the alert would be lifted. of Tangshan's 33 steelmakers, 30 have already halved sintering, pelletizing, lime kiln and blast furnace operations since Oct. 10, according to Mysteel consultancy.
Concerns about demand prospects for steel products and raw materials dragged down the Chinese iron ore benchmark by 2.5% over the past two sessions.
Spot and futures prices of the steelmaking ingredient have retreated from five-year peaks hit in July, also because of signs that global production has stabilised after a tailings dam disaster in Brazil early this year tightened supplies.
Global miner Rio Tinto RIO.AX RIO.L said on Wednesday its third-quarter iron ore shipments rose 5% on a year-on-year basis, helped by higher demand from Chinese steelmakers. miner Vale SA VALE3.SA , the world's top iron ore exporter and China's major source of high-grade material, on Monday reported a 35.4% quarter-on-quarter jump in output for the July-September period. Benchmark spot 62% iron ore for delivery to China SH-CCN-IRNOR62 declined to $91.50 a tonne on Tuesday, from Monday's $92.50.
* China's northern cities will be required to cut emissions of dangerous PM2.5 particles by an average of 4% this winter, lower than the 5.5% cut proposed in an earlier draft of the winter pollution plan. "Adding to the gloom were expectations of the World Steel Association that growth in world demand would slow to only 0.2% in 2019," ANZ Research said in a note.
* The most-traded construction steel rebar contract SRBcv1 on the Shanghai Futures Exchange was down 0.7% at 3,316 yuan a tonne.
* Hot-rolled steel coil SHHCcv1 , used in cars and home appliances, slipped 0.4% to 3,306 yuan a tonne.
* China's steel sector fragmentation is worsening, an industry official said on Tuesday, citing unplanned new capacity at small mills undermining government efforts to restructure and merge companies in the huge industry. Dalian coking coal DJMcv1 edged up 0.4% to 1,797.50 yuan a tonne, while Dalian coke DCJcv1 slipped 0.2% to 1,230.50 yuan.
* Stainless steel SHSSc1 declined 0.3% to 15,485 yuan a tonne.