BEIJING:  Chinese iron ore futures dropped some 7% on Tuesday to touch a near two-month low, fuelled by concerns of higher interest rates and still-stagnant demand at home.

The U.S. Federal Reserve approved half point hike last week, and said could stick to that for the next two to three meetings and then assess how the economy and inflation are responding before deciding whether further rises are needed.

"That has led to significant decline in commodities prices denominated in U.S. dollars such as iron ore," GF Futures analysts wrote in a note.

Meanwhile, thin profit margins with steel producers, and an overall steel output controls had curbed production increase and dented demand for steelmaking ingredients, said the note.

The most-active iron ore futures on China's Dalian Commodity Exchange, for September delivery, plunged as much as 7% to 756 yuan ($112.71) per tonne, the lowest since March 16. They were down 5.3% to 770 yuan as of 0330 GMT, and down for a third straight day.

On the Singapore exchange, the most-traded June iron ore contract fell 4.2% to $123.9 a tonne.

Dalian coking coal futures slipped 2.6% to 2,596 yuan a tonne and coke prices fell 2.7% to 3,317 yuan per tonne.

Steel prices on the Shanghai Futures Exchange also declined, with construction material rebar for October delivery down 2.5% to 4,563 yuan a tonne and hot rolled coils faltering 2.3% to 4,666 yuan per tonne.

The June contract of stainless steel on the Shanghai bourse shed 1.7% to 18,790 yuan a tonne. ($1 = 6.7075 Chinese yuan) (Reporting by Min Zhang in Beijing and Enrico Dela Cruz in Manila; editing by Uttaresh.V)