SHANGHAI, March 24 (Reuters) - Chinese steel futures dropped nearly 3 percent on Thursday after a modest pick up in demand in the world's top consumer failed to support strong gains over the past few sessions.
The most-traded rebar, a construction steel product, on the Shanghai Futures Exchange SRBcv1 had fallen 2.6 percent to 2,137 yuan ($328.11) a tonne by 0207 GMT. On Wednesday, it hit its strongest since June 25 last year.
"Steel demand is improving marginally, but prices were rising too fast when the supply glut remains a big problem after mills resumed output, so the market took a break," said Li Wenjing, an analyst with Industrial Futures in Shanghai.
Rising steel prices have improved mills' profitability which encouraged them to accelerate production, a move that could erode any gains in prices.
However, some analysts expect China to take more tough measures to bolster the economy and to cut overcapacity, driving up rebar prices by 24 percent so far this year.
"We think the market is moving upward for April and May, with a seasonal demand pick-up, low steel product inventories and positive prospects on the economy supporting prices," said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen.
On the Dalian Commodity Exchange, the iron ore futures contract for September settlement DCIOcv1 had slumped 5 percent to 393 yuan a tonne by 0207 GMT.
Spot iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI dropped 1 percent to $57.30 a tonne on Wednesday, according to The Steel Index.
Rebar and iron ore prices at 0207 GMT
Contract
Last
Change Pct Change
SHFE REBAR OCT6
2137
-58.00
-2.64
DALIAN IRON ORE DCE DCIO SEP6
393
-21.50
-5.19
SGX IRON ORE FUTURES MAY
50.75
-2.23
-4.21
THE STEEL INDEX 62 PCT INDEX
57.3
-0.60
-1.04
METAL BULLETIN INDEX
57.87
-0.49
-0.84
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.5131 Chinese yuan renminbi)