* Rebar, iron ore futures fall 6 pct before trading limits
* Economic worries combine with seasonal demand slowdown for steel
* Metals and some agriculture contracts also follow
* Dalian exchange vows to keep curbing speculation (Updates prices, adds analyst comment)
By Ruby Lian and Gavin Maguire
SHANGHAI/SINGAPORE, May 9 (Reuters) - Chinese commodities dived on Monday, led by 6 percent falls in steel and iron ore futures, as deepening worries about China's demand extended a fortnight of sharp drops and false rebounds in the country's market for industrial metals.
Speculative funds rushed into China's commodities futures last month, betting the country's economy was bottoming. The buying frenzy alarmed domestic exchanges and regulators fearing a bubble could be forming as volumes and prices soared.
To limit speculation on futures from steel to coal, the country's three commodity exchanges have taken aggressive measures, including raising trading margins and transaction fees, and widening daily movement limits.
The big market swings and the response of authorities have raised concerns about the risk of contagion for global markets, particularly after last year's stock boom and bust.
On Monday, the Dalian Commodity Exchange said it would continue to strengthen its market monitoring and may raise transaction fees further to curb speculation. liquidity has dropped sharply following exchanges' measures, and now investors are worried China's economic trend will be weaker than previously expected, hurting sentiment," said Zhao Chaoyue, an analyst at Merchant Futures in Shenzhen.
The most-traded rebar, or reinforced steel, on the Shanghai Futures Exchange SRBcv1 posted its biggest daily fall on record on Monday. It hit a downside limit of 6 percent to 2,175 yuan ($334.41) a tonne, the lowest since April 7.
September iron ore futures on the Dalian Commodity Exchange DCIOcv1 also tumbled by their daily permissible limit of 6 percent to 388 yuan a tonne.
Spot prices of billet, a semi-finished steel product, regarded as a key reference point for the physical market, have tumbled over the last few days, traders said.
The declines followed customs data on Sunday that showed iron ore imports fell 2.2 percent in April from March, while copper ore and concentrate imports shed 8 percent on the month. concerns about weak fundamentals, iron ore inventories at China's big ports topped 100 million tonnes by the end of April, the China Iron & Steel Association said on Monday.
Chinese stocks also fell in tandem on Monday, reaching eight-month lows. Following the market's nearly 3 percent slump on Friday, the blue-chip CSI300 index .CSI300 dropped 2.1 percent while the Shanghai Composite Index .SSEClost gave up 2.8 percent.
"L-SHAPED" RECOVERY
Talking down the prospect of any quick economic recovery, state-owned People's Daily said on Monday that China's economic trend will be "L-shaped", rather than "U-shaped", and definitely not "V-shaped". demand is seasonally weaker between June and August, while output keeps rising, which has been interpreted by investors as the turning point of the economic recovery," said Zhao of Merchant Futures.
Speculative interest has focused on steel since it is seen as a lead indicator for the commodities complex, which is used at the very early stage of projects.
"In the next two to three months we might see some seasonal factors kicking in to cool prices down and drive speculative buyers away," said Judy Zhu, an analyst with Standard Chartered (LON:STAN) in Shanghai, adding that demand should gradually improve over six to eight months.
Other steelmaking raw material futures also fell on Monday, with metallurgical coke DCJcv1 slumping 6.9 percent and coking coal DJMcv1 down 4.3 percent. Nickel SNIcv1 dropped 3.3 percent.
The selling also hit agricultural futures.
China's Dalian soybeans DSAcv1 slid for a fourth consecutive session on Monday to their lowest in nearly three weeks even as strong demand from the world's top importer of the commodity drove the benchmark U.S. prices Sv1 higher.
Cotton futures CCFcv1 on Zhengzhou Commodity Exchange finished down 2.2 percent, the lowest since April 18. ($1 = 6.5039 Chinese yuan renminbi)
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