* Iron ore, rebar futures stretch losses
* High port inventories and oversupply hurt ore prices
* CISA sees steel oversupply not to ease in Q1
SHANGHAI, Jan 21 (Reuters) - Chinese iron ore futures dropped for the second straight session on Thursday as piling iron ore inventories at ports in the world's top consumer and oversupply pressured the raw material.
Iron ore inventories at China's big ports have surged to above 100 million tonnes, traders said, as Chinese steel mills are running low operation rates while top miners in Australia and Brazil continue ramping up to production.
"High port stockpiles have suggested the supply glut remains overwhelming which will keep pressuring prices," said Sun Feng, an analyst with Orient Futures in Shanghai.
"Some investors are longing the raw material as they believe low inventories of steel products mean steel demand could pick up, but a cooling economy may fail their expectation."
The most active iron ore futures for May settlement on the Dalian Commodity Exchange DCIOcv1 dropped nearly 1 percent to 314.5 yuan ($47.8) a tonne by midday break.
"The (steel) market supply and demand condition will not improve largely in the first quarter, so steel prices are likely to stay volatile at low levels," the China Iron & Steel Association said in a report on Wednesday.
The benchmark May contract for rebar futures on the Shanghai Futures Exchange SRBcv1 traded 0.7 percent lower at 1,813 yuan a tonne by midday break.
China has determined to tackle the overcapacity in industrial metals including steel and cement this year and let more inefficient producers to shut down.
The move, aiming to squeeze steel production, is expected to support steel prices but to pressure iron ore prices due to lower demand, traders said.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI slumped 2.4 percent to $41.1 a tonne on Wednesday, down from a two-week high after four days of gains, according to The Steel Index. Rebar and iron ore prices at 0330 GMT
Contract
Last
Change Pct Change
SHFE REBAR MAY6
1813
-13.00
-0.71
DALIAN IRON ORE DCE DCIO MAY6
314.5
-3.00
-0.94
SGX IRON ORE FUTURES FEB
39.75
+0.30
+0.76
THE STEEL INDEX 62 PCT INDEX
41.1
-1.00
-2.38
METAL BULLETIN INDEX
41.61
-1.17
-2.73
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.5794 Chinese yuan renminbi)