* Soft steel demand drags down iron ore
* Mills reluctant to buy at prices above $55/T -CISA
* Steel prices fall for the 4th day (Updates close prices)
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 DCIOcv1 tumbled to 371.5 yuan ($58.07) a tonne, its lowest since Aug. 12. It pared losses to close down 1.6 percent at 377.5 yuan a tonne.
"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 .IO62-CNI=SI 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 0.68 percent to 2,044 yuan a tonne by close, its fourth straight session of decline.
Rebar and iron ore prices at 0715 GMT
Contract
Last
Change Pct Change
SHFE REBAR JAN6
2044
-14.00
-0.68
DALIAN IRON ORE DCE DCIO JAN6
377.5
-6.00
-1.56
SGX IRON ORE FUTURES SEP
52
-0.77
-1.46
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)