* Soft steel demand drags down iron ore
* Mills reluctant to buy at prices above $55/T -CISA
* Steel price falls for the 4th day
SHANGHAI, Aug 19 (Reuters) - Chinese iron ore futures slumped as much as 3 percent on Wednesday as investors remained wary because soft steel demand has prompted mills to slow purchases of the raw material.
The most traded January iron ore contract on the Dalian Commodity Exchange tumbled to 371.5 yuan ($58.07) a tonne, its lowest since Aug. 12. By the midday break, it had rebounded to 374.5 yuan, still down 2.4 percent on the the day.
"Steel mills are not keen to take deliveries when prices rise above $55 a tonne, while production of some northern mills will be affected for environmental reasons, so iron ore import prices will face a correction this week," the China Iron & Steel Association said in a website report on Wednesday.
China is the world's top steel producer but its mills have held back purchases of iron ore as a result of soft demand for the metal and falling prices. Iron ore supply is also expected to rise in the second half of 2015, piling even more pressure on the primary raw ingredient for steel.
"Mills with very low stocks are still buying. The current situation is that mills have refused to accept high offers while traders have refused to drop prices," said an iron ore trader in Beijing.
Iron ore for immediate delivery to Tianjin port stood unchanged at $56 a tonne on Tuesday, according to The Steel Index.
The most traded January rebar contract on the Shanghai Futures Exchange SRBcv1 fell 1.1 percent to 2,035 yuan a tonne by midday, its fourth straight session of decline.
Rebar and iron ore prices at 0342 GMT
Contract
Last
Change Pct Change
SHFE REBAR JAN6
2035
-23.00
-1.12
DALIAN IRON ORE DCE DCIO JAN6
374.5
-9.00
-2.35
SGX IRON ORE FUTURES SEP
51.8
-0.97
-1.84
THE STEEL INDEX 62 PCT INDEX
56
+0.00
+0.00
METAL BULLETIN INDEX
56.92
+0.26
+0.46
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3980 Chinese yuan)