* Iron ore demand from China seen weakening
* More steel mills to cut output
* Spot iron ore prices break below $50/T
SHANGHAI, Oct 29 (Reuters) - Dalian iron ore futures slumped to a three-month low on Thursday, under pressure from expectations that Chinese steel mills will cut output further in coming months, curbing demand.
The most-active January iron ore contract on the Dalian Commodity Exchange DCIOcv1 fell to a low of 355 yuan ($55.83) a tonne, the lowest since July 28. It was down 1.3 percent at 356.5 yuan a tonne by 0230 GMT.
"There is higher expectation that more mills will slash production due to heavy losses, which will reduce demand for iron ore and temporarily support steel prices," said Li Wenjing, an analyst with Industrial Futures in Shanghai.
"But sluggish steel demand will cap gains in steel prices."
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI tumbled 2.6 percent to $49.50 a tonne on Wednesday, the lowest since July 14.
Chinese steel mills are likely to be forced into making deeper cuts in output over the next few months, as shrinking demand, soaring losses and tighter credit undermine firms in the world's biggest producer. urn:newsml:reuters.com:*:nL3N12S15O
More state-owned steel mills including Hangzhou Iron & Steel 600126.SS and Maanshan Iron & Steel 600808.SS are planning to shut down some capacity by year-end.
The most-traded January rebar on the Shanghai Futures Exchange SRBcv1 inched up 0.3 percent to 1,797 yuan a tonne by 0230 GMT, but was still not far off the record low of 1,781 yuan a tonne hit on Oct. 23.
Rebar and iron ore prices at 0230 GMT
Contract
Last
Change Pct Change
SHFE REBAR JAN6
1797
+5.00
+0.28
DALIAN IRON ORE DCE DCIO JAN6
356.5
-4.50
-1.25
THE STEEL INDEX 62 PCT INDEX
49.5
-1.30
-2.56
METAL BULLETIN INDEX
49.95
-1.55
-3.01
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3590 Chinese yuan renminbi)