SINGAPORE, Feb 17 (Reuters) - Shanghai rebar steel futures fell to fresh six-week troughs on Friday and posted their steepest weekly loss in nearly four months as demand eased in top consumer China, sending benchmark iron ore prices lower for an eighth consecutive day.
The weakness in China's steel market has restrained demand for iron ore, the raw material used to make steel, with sellers slashing offer prices for imported ore for a fourth straight day on Friday, price data from industry consultancy Umetal shows.
The most-traded May rebar contract on the Shanghai Futures Exchange slipped to a session low of 4,148 yuan ($660) a tonne, a level not seen since Jan. 5, before closing at 4,157 yuan, down 0.3 percent.
Rebar, used in construction, fell 3 percent this week in its sharpest decline since the week ended Oct. 21.
"The big issue right now is steel margins, which are continuing to drop, so there's not a lot of incentive for mills in China to increase production," said a physical iron ore trader in Singapore.
Iron ore with 62 percent iron content .IO62-CNI=SI, a market benchmark, dropped 0.4 percent to $136.80 a tonne on Thursday, reference price provider Steel Index said, matching a level last seen on Dec. 28.
Thursday marked iron ore's eighth straight day of declines, its longest losing streak since October, when prices fell to levels not seen since December 2009 because slower Chinese demand curbed steel prices, and consequently, output.
"Most iron ore traders who were in the market earlier in the week have now retreated. Confidence in the steel market remains weak," Steel Index said.
Falling iron ore prices normally draw Chinese buyers back into the market, but traders say they could be waiting for a further correction.
"The question is at what price they will come back to the market - is it $5 lower or $10 lower from current prices?" the Singapore trader said.
"It will all depend on steel prices. If physical demand for steel comes back then they will buy iron ore."
In a sign iron ore spot prices may have more room to drop, prices of nearby swaps <0#SGXIOS:> extended losses on Thursday, with contracts from March onwards at a discount to spot.
China has raised its resource tax on iron ore, tin, molybdenum, magnesium, talc, and boron in a bid to conserve resources, an official newspaper said, a move that could curb the output of local producers and make imports more attractive.