Iron ore futures down as much as 2.5% in early trade

* Spot 62% iron ore fall to $113 per tonne

* Shanghai steel rebar prices edge lower

BEIJING, July 24 (Reuters) – Iron ore futures in China fell for a second straight session on Friday, dropping as much as 2.5% in early trade, as demand for steel products slipped this week on lean downstream consumption.

Demand for steel products in China dipped 1.3% this week from a week earlier, according to Reuters calculations based on steel production and inventory data from Mysteel consultancy.

The most-active September contract for iron ore, the key steelmaking ingredient, on the Dalian Commodity Exchange fell 1.2% to 835 yuan ($119.14) per tonne by 0230 GMT. The contract is on course for a 1.1% weekly gain.

“Robust demand and supply side issues have helped push (iron ore) prices above $100/t for the first time in 12 months,” ANZ Research analysts wrote in a note. “However, we see a disconnect between iron ore and steel markets, which could see prices fall fast if sentiment changes suddenly.”

Steel rebar prices on the Shanghai Futures Exchange , for October delivery, fell 0.3% to 3,777 yuan per tonne and hot-rolled coils edged down 0.1% to 3,807 yuan per tonne.

Analysts with ANZ Research also said Chinese steelmakers would lower production in the second half of the year to protect steel margins. “This will ultimately hurt iron ore prices,” it added.

FUNDAMENTALS

* Spot prices for iron ore with 62% iron content for delivery to China, assessed by consultancy SteelHome, fell by $0.5 to $113 per tonne on Thursday from the previous session. SH-CCN-IRNOR62

* Stainless steel futures rose 1.8% to 13,655 yuan per tonne.

* Dalian coking coal was unchanged at 1,229 yuan and coke gained 0.8% to 2,007 yuan per tonne. ($1 = 7.0086 Chinese yuan) (Reporting by Min Zhang and Tom Daly; editing by Uttaresh.V)