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* Dalian iron ore hits one-month low
* Smog eases in some parts of China but mills wary
* Spot iron ore down for fourth day on Wednesday (Updates prices)
By Manolo Serapio Jr
MANILA, Dec 22 (Reuters) - Chinese steel and iron ore futures slumped more than 4 percent on Thursday as a smog that engulfed northern cities of the country this week slowed trading activity.
The smog has thinned in some parts including in the port city of Tianjin, but traders say many steel mills exercised caution on worries that air pollution may worsen again in the next few days.
The most-active rebar on the Shanghai Futures Exchange closed down 4.2 percent at 3,026 yuan ($436) a tonne.
On the Dalian Commodity Exchange, iron ore dropped 4.4 percent to end at 542.5 yuan a tonne. It fell as far as 541.50 yuan, its weakest since Nov. 22.
Both commodities have lost at least 15 percent since hitting nearly three-year highs last week. They gained marginally on Wednesday after a five-day slide.
Some mills were starting to purchase iron ore again with the smog easing on Thursday, but they are still cautious about the weather, said a trader based in Tianjin.
"If this weekend the smog returns then mills will stop or limit production again," he said.
Blue skies returned to Beijing on Thursday after winds dispelled dangerously high levels of air pollution that had blanketed the Chinese capital for five days prompting a pollution red alert, but large parts of northern China remain under choking smog.
The Air Quality Index in Beijing spiked to more than 400 overnight, but by morning had dropped to about 50.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB slipped 0.5 percent to $79.19 a tonne on Wednesday, according to Metal Bulletin, falling for a fourth straight day.
"Due to the air pollution in northern China, deliveries from northern mills to eastern China decreased sharply," Metal Bulletin said in a note. ($1 = 6.9465 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Sunil Nair)