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* Sell-off threatens months-long speculative rally
* BarCap sees more downside, puts avg iron ore at $70/t in Q2
* China iron ore stocks rise again
BEIJING, March 27 (Reuters) - Chinese steel and iron ore futures sank to their lowest in more than six weeks on Monday, extending a five-day losing streak as speculative investors continued their exodus amid mounting concerns about demand and growing inventories.
Iron ore was on track for its biggest one-day drop since late November as stockpiles at major ports in China, the world's top steelmaker, rose for a second week, topping 132 million tonnes last week, the highest since at least 2004, according to SteelHome consultancy. SH-TOT-IRONINV
Steel was set for its worst day since early February as funds and other speculative investors exited long positions and placed fresh bearish bets.
At 0417 GMT, the most-active rebar contract on the Shanghai Futures Exchange was down 3.97 percent at 3,026 yuan ($440.31) a tonne, after falling as far as 3,003 yuan, its lowest since Feb. 10.
Iron ore on the Dalian Commodity Exchange plunged 5.95 percent to 545.5 yuan ($79.37) per tonne, having touched 541 yuan earlier, its weakest since Feb. 8.
"China's steel market is showing signs of price weakness and the move of (hot-rolled-coil) prices into a discount relative to domestic rebar prices is a sign of further weakness ahead," said Barclays Capital.
"We feel that there is further downside risk for the benchmark (iron ore) price."
The bank expects iron ore prices to average $70 per tonne in the second quarter, down from around $80 currently.
The latest sell-off threatens the months-long rally and was triggered by concerns about demand from the building sector after Beijing imposed fresh curbs on lending in real estate in China last week.
Last week, rebar lost 5.5 percent and iron ore fell 7 percent, the biggest weekly drop for both contracts since December. ($1 = 6.8725 Chinese yuan renminbi) (Reporting by Josephine Mason; Editing by Richard Pullin)