* Shanghai rebar drops more than 4 pct, Dalian ore down 3 pct
* Rebar volume, Dalian ore open interest drop sharply
* Coking coal, coke futures also slip
* Activity at China factories shrink for 14th straight month (Updates prices, adds volumes and open interest falling)
By Manolo Serapio Jr
MANILA, May 3 (Reuters) - Steel and iron ore futures in China fell sharply on Tuesday, recoiling again after big gains in the prior session as Chinese steel producers boost output, and exchanges keep a closer eye on commodity markets after recent wild swings.
The price drop was accompanied by steep declines in volumes and open interest, or open contracts, as investors withdrew after a frenzied buying spree this month, which sparked fears that markets were heading for a dangerous boom-and-bust cycle. Open interest in the most-active Dalian iron ore contract fell to the lowest since November 2015.
China's securities regulator on Friday urged commodity futures exchanges to curb excessive speculation, saying it would not allow the futures market to become a "hot-bed" for speculators. most traded rebar, a construction steel product, on the Shanghai Futures Exchange SRBcv1 closed down 4.5 percent at 2,451 yuan ($379) a tonne, but off the session low of 2,432 yuan. Traded volume on the contract fell to the equivalent of just over 30 million tonnes, the smallest since mid-March.
Rebar climbed more than 20 percent in April in its biggest monthly gain ever, with volume on the most-active contract hitting a record 1.4 billion tonnes, enough to build 15,000 San Francisco's Golden Gate Bridges. crude steel output hit a record high of 70.65 million tonnes in March and analysts and traders expect production to have remained strong in April as a rally in steel prices spurred mills to lift output. The April data will be released later this month.
"Because production has returned... some downward risk will also drive price movement in the short term," said Kevin Bai, analyst, CRU consultancy in Beijing.
"Therefore, I think prices will remain volatile in the next month or so."
Also weighing on sentiment, a private survey on Tuesday showed activity at China's factories shrank for the 14th straight month in April as demand stagnated. separate Chinese government survey on Sunday showed activity in China's manufacturing sector expanded for the second month in a row in April, but only marginally. Bai added that rising real estate investment could continue to support Chinese steel prices this month as a seasonal pickup in construction demand is expected to persist.
The inventory of steel products held by Chinese traders, including rebar, dropped 3 percent last week from the previous week, said Bai, reflecting firm consumer demand.
Tuesday's losses in steel spread to raw materials iron ore and coking coal.
On the Dalian Commodity Exchange, the most-traded September iron ore DCIOcv1 closed down 3 percent at 442.50 yuan a tonne, after touching a session low of 431 yuan.
Open interest in the contract was at less than 800,000 lots, the lowest since November 2015.
Dalian coking coal DJMcv1 slid 4.3 percent to end at 727 yuan a tonne after falling as low as 707.50 yuan. Coke DCJcv1 slipped 1.3 percent to 1,076.50 yuan a tonne.
Rebar and all the three steel-making commodities rebounded sharply on Friday to end April with big gains as robust construction demand spurred buying.
($1 = 6.4734 Chinese yuan)
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http://tmsnrt.rs/1VHWx82
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