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UPDATE 2-China steel and iron futures fall to lowest ever levels

* Shanghai rebar, Dalian iron ore hit downside limit

* Iron ore stocks in China swell to record 105 mln tonnes

(Updates prices)

SINGAPORE, March 10 (Reuters) - Chinese steel and iron ore futures fell to their lowest levels ever on Monday after a surprise drop in exports swung China's trade balance into deficit last month and amplified fears of a slowdown in the world's No. 2 economy.

Its exports fell 18.1 percent in February from a year ago, while the market had been expecting an increase. The dismal numbers followed a series of factory surveys since the start of 2014 that have pointed to weakness in economic activity as demand has faltered at home and abroad.

The most-traded rebar for October delivery on the Shanghai Futures Exchange slid 4 percent to settle at its lowest ever level of 3,221 yuan ($530) a tonne, falling by its daily downside limit.

The disappointing trade data weighed on other commodities including copper and oil, although China's imports of most were up on the year. The weak exports suggested China's commodity import demand could shrivel in coming months as end-users draw down swollen inventories.

"The China data shows there will be more difficult times ahead," an iron ore trader in Shanghai said.

Iron ore for immediate delivery to China <.IO62-CNI=SI> fell 8.3 percent to $104.70 a tonne on Monday, its weakest since October 2012, according to data compiled by Steel Index.

Iron ore for delivery in September on the Dalian Commodity Exchange dropped almost 6 percent to close at 728 yuan a tonne, its weakest since the bourse launched iron ore futures on Oct. 18.

Steel demand in China, the world's biggest consumer and producer, has been weak since the start of the year as a slowing economy curbs demand for the building material.

Construction activity, which typically picks up from March, is unlikely to spur a strong recovery in demand for steel as Beijing pursues economic expansion that is driven less by investment and more by domestic consumption.

Iron ore, China's top import commodity by volume and the biggest revenue earner for global miners Vale, Rio Tinto and BHP Billiton , has lost around 15 percent this year, among the hardest hit commodities. Mining shares fell in the Australian, European and Latin American markets.

'MORE RELUCTANT'

The sustained slide in steel prices suggests more downside risk for iron ore, traders said.

"Mills are more reluctant to buy iron ore in this situation, and we will see iron ore continue to drop in the next few days. We may break $100 in a very short time," another trader in Shanghai said.

A slump in iron ore to a three-year low of $86.70 in September 2012 shuttered many high-cost mines in China and forced global miners to rethink expansion and focus on cost cuts.

The price slide comes after stockpiles of imported iron ore at Chinese ports rose to a fresh record of 105 million tonnes <SH-TOT-IRONINV> on Friday, according to data from industry consultancy Steelhome.

China's iron ore imports rose 11.9 percent in February from a year earlier to 63.2 million tonnes but were still down from a record high of 86.8 million tonnes in January.

The sustained increase in stockpiles reflected arrivals of iron ore contracted by Chinese mills under long-term deals with miners, traders said, as well as the growing use of the commodity as a loan collateral amid tight credit conditions.

($1 = 6.1260 Chinese yuan)

(Additional reporting by Maytaal Angel in London; Editing by Subhranshu Sahu and Jane Baird)