Asia Steel-China spot prices down 5 pct, reverse brief gain

* China prices down 5 pct after first weekly rise in 5 months

* China's Nov steel exports tumble on weak regional demand

* Iron ore, scrap prices extend gains as China demand revives

By Miyoung Kim

SEOUL, Dec 12 (Reuters) - Asian steel prices fell 5 percent this week, reversing their first weekly rise in more than five months on poor demand that was underlined by a 31-month low for Chinese steel exports.

November steel exports from the world's top producer dropped to 2.95 million tonnes, only three months after an all-time peak of 7.7 million tonnes in August, indicating global demand is sharply weakening as the credit squeeze spreads to a deep economic recession. [ID:nLA612168]

"The market situation...has already got worse than it was during the Asian financial crisis," said a trader in South Korea, referring to a collapse in Asian economies in 1997.

"There's simply no demand and steel mills are encouraging those who have only marginally reduced output to become more aggressive to support prices."

In China, the price of benchmark hot-rolled coil free on board (FOB) fell 5 percent to $490 a tonne on the week, data from Metal Bulletin showed, after an 11 percent gain last week. The price is down by more than half from a record high of $1,030 hit in July.

The country is considering buying some steel products for its reserves and raising export tax rebates, a government official said on Friday. [ID:nPEK65595]

Although many mills are deepening production cuts, expecting the market will slide further to hit bottom early next year, cautiously optimistic views are emerging that prices below production costs may recover soon or at least stabilise.

This has led to a recovery in some input costs, with prices of Japanese steel scrap up 4 percent to 16,360 yen ($178.8) a tonne on the week, having risen 72 percent in just four weeks, according to the Japan Ferrous Raw Material Association.

Import prices of iron ore fines to China rose for a third week to $73 a tonne, Metal Bulletin data showed.

China's iron ore imports also rose 6 percent in November from the previous month, indicating its steel mills may have started restocking for production recovery as China plans to inject 4 trillion yuan to stimulate its economy, mainly via transportation and infrastructure construction.

"Nothing has happened in the Chinese market and the global steel market to warrant a significant rebound," Shivanand V Salgaocar, managing director of Indian iron ore miner V.M. Salgaocar & Brother, said on Thursday. [ID:nBOM398020]

Global steel output in the fourth quarter of this year may drop almost 15 percent from a year ago and may fall by about 10-15 percent next year, according to research group World Steel Dynamics. [ID:nL2444382]

Moody's ratings agency also cautioned on Wednesday that China's massive multi-year fiscal stimulus programme will only have a limited effect, as falling overseas demand will hit manufacturers and slow its economic growth.[ID:nWLA3217]

In South Korea, POSCO (005490.KS), the world's No.4 steelmaker, said it would almost double its domestic capital spending next year to a record $4.3 billion in a bold contrarian bet that it can grab market share from shrinking rivals once the world economy begins growing again. [ID:nSEO345854] ($1=6.881 Yuan) ($1=91.51 Yen) (Reporting by Miyoung Kim; Editing by Michael Urquhart)