Chinese commodities fall on oversupply concerns, possible U.S. rate hike

* Metals and agriculture products fall

* Supply glut and possible U.S. interest rate hike dent sentiment

* Steel and iron ore futures fall more than 2 percent

SHANGHAI, May 19 (Reuters) - Most Chinese commodities futures fell on Thursday, amid cautious sentiment caused by a supply glut for some industrial metals and a possible U.S. interest rate hike.

Some traders are concerned that China’s own interest rate easing cycle could be over, limiting the prospects for the world’s No. 2 economy and prompting investors to become bearish on commodities amid concerns on demand recovery.

Chinese steel and iron ore futures dropped by more than 2 percent, as demand is faltering seasonally. However, steel mills are still picking up production because of rising prices earlier this year, worsening a supply glut that led to accusations China is dumping low-price steel onto global markets.

“The fundamentals for industrial metals haven’t improved, and production for some metals including steel and aluminium is rising without enough demand support, so we are bearish in the medium term,” said Wu Ren, research director of the investment department with Nanhua Futures in Hangzhou.

“The expectation of the U.S. rate hike and weakening oil prices also hit market confidence and drove down commodities.”

The most-traded rebar futures contract on the Shanghai Futures Exchange hit a session low of 2,025 yuan ($310) a tonne. It has shrunk 27 percent from its 2016 peak in April.

Dalian iron ore futures dropped to a low of 367 yuan a tonne and have fallen more than a quarter from the April high. Coke also slide more than 2 percent in the morning session.

The U.S. Federal Reserve indicated he U.S. economy could be ready for another interest rate increase next month, according to the minutes from the central bank’s April policy meeting released on Wednesday.

While Chinese commodity futures are typically priced in yuan, they trade in line with other commodity markets priced in U.S. dollars. Dollar-denominated commodity futures tend to fall when the greenback gains since it makes purchasing them more expensive for buyers paying with other currencies.

The slide has spread to other assets, with nickel, zinc, rubber down over 1 percent. Agriculture products futures also slid more than 1 percent on Thursday. ($1 = 6.5419 Chinese yuan renminbi) (Reporting by Ruby Lian and David Stanway; Editing by Christian Schmollinger)