By Manolo Serapio Jr

SINGAPORE, Feb 4 (Reuters) - Shanghai steel futures jumped

more than 1 percent to nine-month highs on Monday, supported by

a better outlook for demand from top steel consumer China as its

economy regains steam.

Rising steel prices may support appetite for iron ore this

week, before Chinese mills take their Lunar New Year break and

more traders may take positions on hopes steel demand will pick

up pace after the week-long holiday.

Price offers for imported iron ore cargoes in China rose by

$1 to $2 per tonne on Monday after the benchmark price rose to

its highest in almost three weeks on Friday.

The most briskly traded rebar contract for May delivery on

the Shanghai Futures Exchange hit a session-high of

4,200 yuan ($670) a tonne, a level last seen on May 7, 2012. It

was up 1.4 percent at 4,195 yuan by the midday break.

'Expectations are growing that Chinese steel demand will be

strong after the holiday, but I'm not sure that steel prices

have risen enough to support a further increase in iron ore

prices,' said a Shanghai-based iron ore trader.

Some steel mills may still be losing 100 to 200 yuan per

tonne as iron ore prices have far outpaced steel, he said,

adding that some producers could be starting to step back from

the spot market as iron ore approaches its 2013 peak of $158.50,

a 15-month high touched on Jan. 8.

Benchmark iron ore with 62 percent iron content rose half a percent to $153.20 a tonne on Friday,

the highest since Jan. 14, based on data from price provider

Steel Index.

At current prices, iron ore has risen 77 percent from

September lows while Shanghai rebar is up just 30 percent.

'The clients we are dealing with already have enough stocks

of iron ore and they don't intend to buy further this week. But

there could be some other buyers out there, probably traders,'

said the Shanghai trader.

Iron ore prices rose 3 percent last week, the most in about

a month, as buyers, both mills and traders, resurfaced following

gains in steel prices as investors bet on demand picking up pace

after the holiday for Chinese New Year, which falls on Feb. 10

this year.

Positive manufacturing data last week strengthened

investors' belief that the world's No. 2 economy will see

brisker growth in the first half of 2013. Growth in China's

services sector rose for the fourth straight month in January.

Iron ore should range between $130 and $150 this year, with

a steep drop in prices unlikely, despite a potentially small

supply surplus seen later in the year, said Henry Liu, head of

commodity research at Mirae Asset Securities in Hong Kong.

'Our concern is not oversupply of iron ore in 2013 --

instead, it is uncertainty over Chinese steel demand in the

second half of 2013,' Liu said in a note.

Shanghai rebar futures and iron ore indexes at 0431 GMT

Contract Last Change Pct Change

SHFE REBAR MAY3 4195 +59.00 +1.43

THE STEEL INDEX 62 PCT INDEX 153.2 +0.70 +0.46

METAL BULLETIN INDEX 153.34 +0.09 +0.06

Rebar in yuan/tonne

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

($1=6.2270 Chinese yuan)

(Reporting by Manolo Serapio Jr.; Editing by Clarence

Fernandez)

Keywords: MARKETS IRONORE/

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

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