SINGAPORE, Dec 9 (Reuters) - Shanghai rebar futures dropped for a second day on Friday, weighed down by a weak outlook for steel demand in top market China after fresh data suggested the Chinese economy was cooling off rapidly, although hopes of further monetary easing capped losses.
China's industrial output growth hit its slowest pace in more than two years in November and inflation tumbled as economic conditions deteriorated, raising expectations Beijing will ease monetary policy again.
China's annual inflation rate slid to 4.2 percent, the lowest level since September 2010, with producer inflation falling steeply to 2.7 percent in November from 5.0 percent in October.
The most-traded May rebar contract on the Shanghai Futures Exchange eased 0.2 percent to close at 4,169 yuan a tonne, and was nearly flat on week.
"Steel demand is really slow, so there's no real interest for iron ore at this point," said an iron ore trader in the port city of Rizhao in China's eastern Shandong province.
Iron ore with 62 percent iron content was unchanged at $139.40 a tonne on Thursday, cost and freight delivered to China, according to Steel Index .IO62-CNI=SI.
"We are offering our cargoes to all our customers, including traders and mills, but most of them choose to wait and see," said the Shandong-based trader, adding he was only able to sell 10,000 tonnes of iron ore this week, versus at least 50,000 tonnes a week when the market rallied in November.
"Chinese steel mills are generally not eager to replenish stocks, with many expecting further price falls," Steel Index said in a note.
China's crude steel output in November fell 9 percent to 49.88 million tonnes from the previous month, the lowest level since September last year, data from the National Bureau of Statistics showed on Friday.
Daily output by the world's top steel producer averaged 1.663 million tonnes last month, as mills scaled back production amid weakening demand.
The November daily run rate puts China's annualised steel output at 607 million tonnes, down from a record 627 million tonnes in 2010.
China's crude steel output stood at 581 million tonnes in January to October, up 11 percent from a year ago.
"End demand remains challenged by weak new residential construction activity, and slowing growth in steel demand more broadly," Commonwealth Bank of Australia said in a note.
But with access to trade finance improving and steel inventories remaining relatively low, the Australian bank said "a moderate demand recovery and/or restocking cycle cannot be ruled out in the short term".