September 7, 2017 / 7:46 AM / 6 months ago

UPDATE 1-China steel futures drop for third day on weak demand outlook

* Environmental inspections could sap appetite for steel

* Australia iron ore supply may increase by end-Sept -analysts (Updates prices)

BEIJING, Sept 7 (Reuters) - China’s steel futures fell for a third day on Thursday on worries that a wave of environmental inspections at industrial sites would curb demand for rebar, a steel product mainly used in the construction sector.

The Ministry of Environmental Protection (MEP) in September launched a fourth round of environmental inspections, with some factories and construction sites to be monitored by local authorities through the autumn and winter.

“The inspections affect downstream buyers more than steel mills on the supply-side,” said Wang Yilin, analyst at Sinosteel Futures.

The most-active rebar futures contract on the Shanghai Futures Exchange fell 2.4 percent to 3,958 yuan ($608.24) a tonne on Thursday.

Spot rebar prices dropped 0.3 percent to 4,406.28 yuan a tonne on Wednesday, according to data from the Mysteel website.

“The market is stepping back for now and waiting for further momentum to rise,” said Wang.

Pressured by falling rebar prices, the most-traded iron ore futures contract on the Dalian Commodity Exchange dropped 3.8 percent to 545.5 yuan a tonne, its biggest one-day fall in two weeks.

Analysts are convinced that iron ore prices may see a bigger pull back by the end of September, when supply of high-grade iron ore from Australia is expected to increase to ease a months-long shortage in the market.

$1 = 6.5073 Chinese yuan Reporting by Muyu Xu and Beijing Newsroom; Editing by Joseph Radford and Tom Hogue

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