* Dalian iron ore hovers near Tuesday’s two-month low
* Slower construction demand in China weighs on steel (Recasts, updates prices)
By Manolo Serapio Jr
MANILA, June 20 (Reuters) - Steel futures in China recovered on Wednesday after the previous session’s nearly 3-percent drop, although lingering worries over a trade spat between Beijing and Washington curbed gains.
Lean construction demand in China, the world’s top steel consumer and producer, was a drag on steel prices, with iron ore futures hovering near a two-month low hit in the previous session.
The most-active October rebar on the Shanghai Futures Exchange closed up 0.5 percent at 3,817 yuan ($590) a tonne, after falling 2.9 percent in the previous session.
The most-traded September iron ore on the Dalian Commodity Exchange slipped 0.4 percent to 453 yuan per tonne, but off the day’s low of 449 yuan. The raw material dropped 4.6 percent in the prior session when it touched a two-month trough of 443.50 yuan.
Worries that a growing trade row between China and the United States could hurt the Chinese economy fuelled a sell-off in risky assets, with steel and iron ore futures among the hardest hit.
China has underestimated U.S. President Donald Trump’s resolve to impose more tariffs unless it changes its “predatory” trade practices, a White House trade adviser said on Tuesday.
The widening coverage of the U.S. tariffs that could include steel-made products in China would affect Chinese steel demand, said Kevin Bai, analyst at CRU consultancy in Beijing, adding investors will remain glued on the issue and would await any developments.
Trump had threatened on Monday to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliated against his previous target of $50 billion in imports to which China has responded in kind.
“Prices may be quite volatile in the short term, but relatively in the long term it may face some downside risk,” Bai said.
That is partly because Chinese steel demand is seeing some weakness with the hot weather in the northern part of the country and rains in the south hampering construction activity, said Bai.
While China’s continuing environmental inspections have restricted production in some provinces such as Jiangsu and Hebei, he said mills not covered by the curbs would “ramp up production whenever possible” given strong margins.
Coking coal dropped 1 percent to 1,209 yuan per tonne and coke gained 0.3 percent to 2,123.50 yuan.
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB dropped 3 percent to $66.45 a tonne on Tuesday, the lowest since June 5, according to Metal Bulletin.
$1 = 6.4658 Chinese yuan Reporting by Manolo Serapio Jr.; Editing by Sunil Nair and Sherry Jacob-Phillips