China steel, iron ore extend losses as trade fears weigh

* Dalian iron ore near Tuesday’s two-month low

* Losses smaller compared with Tuesday’s slide

* Slower construction demand in China weighs on steel

MANILA, June 20 (Reuters) - Steel and iron ore futures in China extended losses on Wednesday, still pressured by worries over a widening trade spat between Beijing and Washington, although losses were more modest compared with the previous session’s slide.

Slower construction demand in China, the world’s top steel consumer and producer, also weighed on steel prices, with iron ore futures trading near a two-month low.

The most-active October rebar on the Shanghai Futures Exchange was down 0.3 percent at 3,786 yuan ($585) a tonne by midday break, after sliding 2.9 percent on Tuesday.

The most-traded September iron ore on the Dalian Commodity Exchange fell 0.8 percent to 451.50 yuan per tonne, adding to a 4.6 percent drop in the prior session when it touched a two-month trough of 443.50 yuan.

Worries that a growing trade row between China and the United States could hurt the Chinese economy fuelled a selloff in risky assets, with steel and iron ore futures among the hardest hit.

China has underestimated U.S. President Donald Trump’s resolve to impose more tariffs unless it changes its “predatory” trade practices, a White House trade adviser said on Tuesday.

Trump threatened on Monday to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliated against his previous target of $50 billion in imports to which China has responded in kind.

The widening coverage of the U.S. tariffs that could include steel-made products in China would affect Chinese steel demand, said Kevin Bai, analyst at CRU consultancy in Beijing, adding investors will remain glued on the issue and would await any developments.

“Prices may be quite volatile in the short term, but relatively in the long term it may face some downside risk,” he said.

That is partly because Chinese steel demand is seeing some weakness with the hot weather in the northern part of the country and rains in the south hampering construction activity, said Bai.

And while China’s continuing environmental inspections have restricted production in some provinces such as Jiangsu and Hebei, he said mills not covered by the curbs would “ramp up production whenever possible” given strong margins.

Coking coal fell 1.3 percent to 1,205 yuan per tonne and coke slipped 0.7 percent to 2,103 yuan.

Iron ore for delivery to China's Qingdao port .IO62-CNO=MB dropped 3 percent to $66.45 a tonne on Tuesday, the lowest since June 5, according to Metal Bulletin. ($1 = 6.4757 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Sunil Nair)