* Dalian iron ore drops 4 pct, adding to Wednesday's 7 pct-slide
* Baltic Exchange main shipping index falls to three-month low
* Shanghai rebar drops 1.2 pct, also down for third day (Updates prices)
By Manolo Serapio Jr
MANILA, May 25 (Reuters) - Chinese iron ore futures slumped four percent on Thursday, falling for a third day in a row, amid persistent worries over demand, with stockpiles mounting around the country's ports.
Those demand concerns were amplified on Wednesday by Moody's downgrade of China's credit ratings, potentially limiting Beijing's capacity to spur economic growth.
The most-active iron ore contract, for September delivery, on the Dalian Commodity Exchange DCIOcv1 closed down 4 percent at 448 yuan ($65) a tonne.
The steelmaking commodity slid 7 percent on Wednesday, its sharpest fall in more than two weeks, and was the hardest hit among China's commodity futures, after the Moody's downgrade. a harsh reaction in China's futures markets underpins our view that prices had been pushed higher by improving sentiment rather than improving fundamentals, given that the downgrade does not affect the short-term demand outlook," Julius Baer analyst Carsten Menke said in a note.
"Medium to longer term, the debt burden may limit the government's ability to stimulate the economy via metals-intensive infrastructure investments ... We still see downside for iron ore as well as steel prices and remain cautious."
The most-traded rebar on the Shanghai Futures Exchange SRBcv1 dropped 1.2 percent to 3,219 yuan a tonne.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB slid 2.4 percent to $60.52 a tonne on Wednesday, according to Metal Bulletin.
It was the weakest level since May 11 for the spot benchmark, which has lost 23 percent this year.
Imported iron ore inventories at China's ports rose to 136 million tonnes last week, the most since 2004, according to SteelHome consultancy. SH-TOT-IRONINV
In a sign of weak demand, the Baltic Exchange's main sea freight index .BADI , which tracks rates for ships carrying dry bulk commodities including iron ore, fell to its lowest in nearly three months on Wednesday. = 6.8684 Chinese yuan)