* Rebar down 2.8 pct after hitting highest since April 2014
* Dalian iron ore falls 3.8 pct, dragged down by steel
* Chinese exchanges again impose curbs to tame rallies
By Manolo Serapio Jr
MANILA, Nov 29 (Reuters) - Chinese iron ore futures retreated on Tuesday after steel prices pulled back from a 31-month high hit in a rally that again prompted exchanges to step in to tame the surging market.
A reduction in China's steel capacity along with a push to spend more on infrastructure has fuelled a 90 percent spike this year in prices of construction steel product rebar.
The most-traded rebar for May delivery on the Shanghai Futures Exchange SRBcv1 rose as far as 3,348 yuan ($486) a tonne, its loftiest since April 2014. But by the midday break, it was down 2.8 percent from Monday's settlement at 3,188 yuan.
May iron ore on the Dalian Commodity Exchange DCIOcv1 was down 3.8 percent at the day's low of 592 yuan per tonne.
In China's latest move to tame speculative trading and surging prices, the Shanghai exchange limited the size of positions taken by non-members in rebar futures to 8,000 lots from 10,000 lots starting on Tuesday. Monday, the Dalian exchange increased the margin requirement for iron ore futures to 10 percent. red-hot rally in steel had also spilled over to raw material iron ore as well as to zinc, used to galvanise steel and which raced to a nine-year high on Monday. from the curbs, the price of iron ore could weaken again next year given there's no shortage in available supply, said CLSA analyst Daniel Meng.
"Iron ore demand would become slightly higher because steel demand is strong. But on the supply side, you continue to have new low-cost capacity this year and into next year," said Meng.
The slide in futures could pull spot iron ore back below $80 a tonne, a level it breached on Monday for the first time since October 2014.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB rose 1.5 percent to $80.83 a tonne on Monday, according to Metal Bulletin. ($1 = 6.8920 Chinese yuan)