* Record steel output in China despite tighter environmental rules
* Decline in iron ore, steel prices seen limited
By Manolo Serapio Jr
MANILA, Sept 14 (Reuters) - Chinese steel and iron ore futures edged lower on Thursday, extending their declines along with other industrial commodities in a broad-based retreat that followed recent sharp gains.
Losses may be limited as China enters peak steel demand season that would last through October and should underpin prices, analysts say.
The most active rebar on the Shanghai Futures Exchange was down 0.4 percent at 3,933 yuan ($601) a tonne, as of 0223 GMT. The construction steel product touched a 4-1/2-year peak of 4,194 yuan on Sept. 4.
Iron ore on the Dalian Commodity Exchange dropped 1.5 percent to 533.50 yuan per tonne.
Both steel and iron ore futures have mostly posted losses this week, except for a slight gain on Tuesday.
“To some extent, today’s trading is a reflection of the recent substantial increases in price,” said Michael McCarthy, chief market strategist, CMC Markets.
“The pullback that we are seeing in iron ore is not limited to iron ore itself, but it’s something we are seeing across the industrial metals complex.”
Other commodities were also sold off, with Shanghai-traded copper touching a one-month low, following an overnight decline of 1.7 percent in copper prices on the London Metal Exchange.
McCarthy said the uptrend in prices for both steel and iron ore since late May looks intact and the recent declines show “a corrective move rather than a change in direction for the market.”
Rising steel stocks among Chinese traders and falling inventories of iron ore at the country’s ports suggest both steel traders and producers are preparing for stronger steel consumption as construction activity picks up. SH-TOT-RBARINV SH-TOT-IRONINV
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose 0.2 percent to $76.56 a tonne on Wednesday, the highest since Sept. 6, according to Metal Bulletin.
The spot benchmark has gained almost 44 percent from mid-June.
Despite tighter environmental rules in China that has led to many mills being shut or forced to curb output, the country produced a record 74.59 million tonnes of crude steel in August.
Stronger steel prices this year, spurred by China’s infrastructure spending, had pushed construction steel producers to lift output as their profit margins climbed.
$1 = 6.5482 Chinese yuan Reporting by Manolo Serapio Jr.; Editing by Sherry Jacob-Phillips