Chinese iron ore futures slumped on Tuesday, retreating from a more than 8-1/2-month closing high hit in the previous session, on concerns about surplus supply of the steelmaking raw material as the coronavirus hit demand outside China.

"Steel production cuts outside China are making it even more a single horse race than it already was," according to a Morgan Stanley research note, which warned of rising risks that cargoes not required by smaller importers could be dumped on China's shores.

"China is less in need of additional ore the diversion of shipments would more likely translate into rising port inventories," it added.

BHP Group reported a 6.3% gain in third-quarter iron ore production and maintained its annual forecast at 273-286 million tonnes, despite an expectation of a sharp drop in global steel output excluding China.

The most-traded September contract of iron ore on the Dalian Commodity Exchange closed down 2.8% at 602 yuan ($85.00), after declining as much as 3.4% to 599 yuan per tonne earlier.

The dive was followed by falling prices in steel futures as demand wilts due to the spreading coronavirus crisis.

Fitch Solutions lowered its growth forecast for China's construction sector to 1.8% in real terms on an annual basis from a previous forecast of 5.2%.

"The government is still expected to announce stimulus measures that would include infrastructure, but these plans are unlikely to have a material impact on 2020 growth," it wrote in a note.

Construction steel rebar for October delivery ended down 1.2% to 3,337 yuan per tonne.

Other steelmaking ingredients tumbled, with Dalian coking coal fell 2.2% to 1,108 yuan per tonne and coke dropped 2.5% to 1,670 yuan a tonne.

Prices for spot cargoes of iron ore with 62% iron content fell to $87 per tonne on Monday.

Hot-rolled coil fell 1.4% to 3,185 yuan per tonne.

Shanghai stainless steel, for June delivery, lost 1.3% at 13,030 yuan per tonne.

More than 2.46 million people have been reported to be infected by the novel coronavirus globally and 169,863 have died, according to a Reuters tally.