* Faltering steel demand puts pressure on prices
* Steel mills slow down buying of iron ore
SHANGHAI, Aug 18 (Reuters) - Chinese rebar futures dropped for the third straight session on Tuesday as tepid demand in the world's top producer forced mills and traders to cut prices, piling pressure on iron ore.
The grim economy in China has hit demand for industrial metals, dragging steel prices down by about a quarter this year and leaving many steel mills with big losses.
The most traded January rebar contract on the Shanghai Futures Exchange dropped to a session low of 2,051 yuan ($321) a tonne, its lowest since Aug. 12. It was down 0.9 percent at 2,056 yuan by the midday break.
"With little sign of any immediate recovery in demand, steel prices are expected to go down further," said Xu Ke, an analyst with Huatai Futures in Shanghai.
"The previous gains in steel prices have improved mills' profit over the past few weeks and this has led them to slow down production cuts, which will in turn weigh on prices."
Spot prices for rebar fell 20 yuan to 2,010-2,020 yuan a tonne in Beijing on Tuesday, with traders keen to sell on expectations of further weakness.
The weakness has prompted steel mills in the world's top buyer of iron ore to slow down restocking of the raw material.
The most traded January iron ore contract on the Dalian Commodity Exchange dipped 0.13 percent to 384 yuan a tonne.
Iron ore for immediate delivery to the Tianjin port slipped 0.4 percent to $56 a tonne on Monday, according to The Steel Index. The spot benchmark hit a one-month high of $56.40 on Aug. 5.
Rebar and iron ore prices at 0330 GMT
Contract
Last
Change Pct Change
SHFE REBAR JAN6
2056
-18.00
-0.87
DALIAN IRON ORE DCE DCIO JAN6
384
-0.50
-0.13
SGX IRON ORE FUTURES SEP
52.85
+0.85
+1.63
THE STEEL INDEX 62 PCT INDEX
56
-0.20
-0.36
METAL BULLETIN INDEX
56.66
-0.08
-0.14
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3936 Chinese yuan renminbi)