UPDATE 1-Chinese steel futures drop for 3rd day on trade war, demand concerns

* Trade war fears still cloud market

* Steel demand remains weak, pressuring prices

* Rebar hits lowest level since July 2017 (Updates close price and steel inventories)

SHANGHAI, March 26 (Reuters) - Chinese steel futures fell for a third straight session on Monday to their lowest in more than eight months, as investors remained worried over the trade spat between the United States and China and the continued weakness in steel demand.

The most active rebar on the Shanghai Futures Exchange fell as much as 3.7 percent to a session low of 3,333 yuan ($527.92) a tonne, the lowest since July 7, 2017. It closed 2.8 percent lower at 3,363 yuan a tonne.

“The U.S. and China trade spat has hit hard on commodities. The market sentiment remains bearish and some steel mills have cut prices, weighing prices. The market will be subject to the changes in inventories,” said Bai Jing, an analyst with Galaxy Futures in Beijing.

U.S. President Donald Trump has aimed to impose tariffs on up to $60 billion of imports from China, and Beijing said it would take strong measures to protect its legitimate rights.

The deepening rift has sent a chill through financial markets and the corporate world as investors predicted dire consequences for the global economy should trade barriers start going up.

Rebar inventories held by traders in big Chinese cities dropped 3 percent to 9.49 million tonnes on March 23 from a week earlier when stocks hit the highest since April 2013, data from industry consultancy Steelhome showed.

Iron ore on the Dalian Commodity Exchange had dropped by 2 percent to 439 yuan a tonne by close.

Coke shed 3.1 percent to 1,833.5 yuan a tonne and coking coal edged up 0.5 percent at 1,243.5 yuan a tonne.

Iron ore for delivery to China's Qingdao port .IO62-CNO=MB dropped $2.6 a tonne to $64.58 a tonne last Friday, according to Metal Bulletin. ($1 = 6.3135 Chinese yuan) (Reporting by Ruby Lian and Josephine Mason; Editing by Subhranshu Sahu)