By Manolo Serapio Jr

SINGAPORE, Jan 24 (Reuters) - Spot iron ore prices rose to

one-week highs as some Chinese steel mills continued to restock

ahead of the Lunar New Year holiday, although buying interest

was lean.

Data showing activity in China's factory sector quickened to

its fastest in two years should back further gains in iron ore,

but steelmakers may only aggressively boost their inventories of

the raw material again if steel demand picks up pace.

The HSBC flash purchasing managers' index for China rose to

51.9 in January, the highest since January 2011, as

manufacturers received more local and foreign orders.

Shanghai steel rebar futures climbed to a seven-month high

on Thursday after the data, but soon surrendered gains to trade

lower. The most active rebar contract for May delivery on the

Shanghai Futures Exchange was down 0.8 percent at 4,020

yuan ($650) a tonne, after rising to 4,067 yuan, its loftiest

since June 26.

Benchmark iron ore with 62 percent iron content climbed 1.2 percent to $147.70 a tonne on

Wednesday, according to Steel Index. It was the highest level

since Jan. 15.

'Some mills are still replenishing, they still want cargo,

but they don't want the price to move up so much. That's why we

are seeing limited deals,' said an iron ore trader in Singapore.

Price offers for imported iron ore in China, the world's

biggest importer, were steady on Thursday.

'We have not bought any new cargoes. We're still clearing

all our stocks before Chinese New Year,' said a trader in

Shanghai, adding his company hopes to sell its remaining

40,000-50,000 tonnes of iron ore inventories at higher prices to

recoup losses from previous cargoes.

The reopening of Australian ports after a brief shutdown due

to a tropical storm will ease worries about supply in the spot

market, and could make this week's price gains fleeting.

Iron ore hit a 15-month top of $158.50 a tonne on Jan. 8 in

a rally that began in December as Chinese mills rebuilt

stockpiles. The price fell more than 8 percent before regaining

some ground this week.

More iron ore restocking by Chinese steelmakers just ahead

of the Lunar New Year holiday in mid-February could boost prices

further, although a sustained rise will hinge on the strength of

China's steel demand.

China's steel demand is expected to rise 3.1 percent in

2013, 0.6 percentage points higher than last year as the economy

recovers, the country's steel industry association said on

Tuesday.

Shanghai rebar futures and iron ore indexes at 0401 GMT

Contract Last Change Pct Change

SHFE REBAR MAY3 4020 -33.00 -0.81

THE STEEL INDEX 62 PCT INDEX 147.7 +1.80 +1.23

METAL BULLETIN INDEX 148.99 +0.92 +0.62

Rebar in yuan/tonne

Index in dollars/tonne, show close for the previous trading day

($1 = 6.2180 Chinese yuan)

(Editing by Miral Fahmy)

Keywords: MARKETS IRONORE/

(manolo.serapio@thomsonreuters.com)(+65 6870 3884)(Reuters Messaging: manolo.serapio.thomsonreuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2013. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.