* Steel futures open interest drops for January contract
* Outlook unclear, some expects property curbs to hit steel demand
SHANGHAI, Oct 26 (Reuters) - Chinese steel futures fell on Thursday, as investors cut positions amid an uncertain outlook on demand in the world's top producer and consumer.
China has stepped up efforts to cut industrial production to to combat smog, which typically occurs during the winter months as industrial emissions mix with smoke from coal-fired heating units. Steel mills have been ordered to curb production between October and March and there has been a slowdown in construction projects, the top consumers of steel.
"The market outlook is mixed at the moment, so some traders have cut their positions to stand on the sidelines at the moment," said a trader in Shanghai.
"The environmental crackdown will not only affect steel supplies, but also dent steel demand, and we are not sure which will be hit harder."
The most active rebar contract on the Shanghai Futures Exchange SRBcv1 , for January delivery, fell 1.7 percent to 3,675 yuan ($554.13) a tonne by 0329 GMT. Hot rolled coil futures slumped 2.2 percent to 3,988 yuan a tonne.
Open interest - the number of positions - held by investors for the January rebar contract dropped 264,000 lots to 2.63 million lots. One contract lot equals 10 tonnes.
China's property sales will slow in the fourth quarter, and the country's economic planner and housing ministry will launch a month-long joint inspection on property developers and estate agents for any signs of price manipulation and falsified contracts, a move that has added worries to steel demand. property control will continue, and I think the curb will also have an impact on steel consumption," said Li Wenjing, a futures analyst in Shanghai.
Iron ore futures on the Dalian Commodity Exchange for January DCIOcv1 slipped 0.9 percent to 454 yuan a tonne.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB slid 0.3 percent to $62.42 a tonne on Wednesday, according to Metal Bulletin. ($1 = 6.6320 Chinese yuan renminbi)