The construction steel rebar contract on the Shanghai Futures Exchange slid as much as 1.7% to 3,882 yuan a tonne, its lowest since June 24.

"The derivatives market is seeing some softness temporarily due to traders shifting their positions around, while the physical markets across steel and iron ore look very robust," said Darren Toh, a data scientist with Singapore-based steel and iron ore analytics firm Tivlon Technologies.

The rest of China's ferrous markets have retreated after last week's gains, led by Dalian iron ore, but Toh said a rebound could be expected.

"Our in-house machine learning model on iron ore is observing further strengthening in steel margins starting from August," he said.

Hot-rolled steel used in cars and home appliances dropped as much as 1.8% to 3,815 yuan a tonne, its lowest since July 15.

FUNDAMENTALS

* The most-active iron ore contract on the Dalian Commodity Exchange, for September delivery, fell as much as 3.9% to 849 yuan a tonne, its weakest since July 8.

* That marked an 8.2% drop for the iron ore benchmark since July 16, when it hit an intraday record high of 924.50 yuan amid falling inventory of imported ore at Chinese ports and brisk demand for the material as steel producers continued to ramp up output.

* Dalian iron ore stretched losses into a third day amid slowing demand in the wake of more output restrictions on steel producers in China's top steelmaking city of Tangshan.

* Benchmark spot 62% iron ore <SH-CCN-IRNOR62> for delivery to China, was down 0.4% at $119.50 a tonne on Tuesday, data from SteelHome consultancy showed.

* Iron ore prices hit their highest levels in more than five years earlier this month on concerns about supply as top producers in Australia and Brazil have lowered shipment and output guidance for 2019.

* Brazilian miner Vale SA has been authorized to partially resume dry processing operations at its Vargem Grande complex, which should add 5 million tonnes to annual production of iron ore, the company said in a securities filing on Tuesday.

* Vale, the world's top iron ore exporter, reaffirmed its 2019 sales guidance on Monday despite weak output in the second quarter due to mine safety checks after a deadly dam burst in January.

* Steelmaking inputs were trading mixed, with coking coal  up 0.9% and coke down 1.2% as of 0312 GMT.