UPDATE 1-Shanghai rebar falls after hitting 2-month top, iron ore firm

* Sellers up price offers after iron ore hits 2-week high
* Global crude steel output flat in September

(Updates rebar price)
By Manolo Serapio Jr
SINGAPORE, Oct 23 (Reuters) - China steel futures slid
nearly 2 percent after hitting their highest level in more than
two months on Tuesday, pointing to caution among investors that
fragile demand in the world's top consumer may not support a
steep rise in prices.
Spot iron ore prices were firmer, backed by hopes Chinese
mills would continue running plants at or near full capacity,
although a sustained decline in steel prices could force some
mills to limit inventories of the raw material, capping further
price gains.
The most active rebar contract for May delivery on the
Shanghai Futures Exchange closed down 1.9 percent at
3,660 yuan ($590) per tonne, wiping out nearly all of its gains
on Monday.
Rebar, used in construction, rose to a session high of 3,746
yuan earlier in the day, its loftiest since Aug. 13.
Sellers of foreign iron ore cargoes to China upped prices by
a dollar per tonne on Tuesday, according to Beijing-based
consultancy Umetal.
That followed a spike of nearly 2 percent in the price of
benchmark 62-percent grade iron ore to a near two-week high of
$117.50 on Monday, based on data from Steel Index.
But deals were scarce so far on Tuesday, traders said,
reflecting hesitation among buyers in chasing prices higher in
the face of still sluggish demand for steel from end-users.
"I'm quite cautious in the short term," said Mark Pervan,
head of commodities research at Australia and New Zealand
Banking Group, who expects iron ore prices to reach $110 by the
end of the year, down 21 percent from end-2011.
"Chinese growth doesn't really start warming up until the
second half of next year. The political change is going to be a
priority in China for the next three to six months," he said,
referring to Beijing's leadership transition that kicks off next
month.
Crude steel output in China, which accounts for about half
of world production, was up a modest 0.6 percent at nearly 58
million tonnes in September, putting global production for the
month nearly flat at 123.63 million tonnes as Western producers
curbed output because of a weak market.
The iron ore physical market started the week strongly with
a Brazilian cargo of 65-percent grade iron ore fines sold on
Monday at a price $2 higher than on Friday, Steel Index said.
But trading on Tuesday was slow, with no deals done on the
GlobalOre trading platform where two Australian cargoes were on
offer.
A 100,000-tonne Australian 62-percent grade cargo was
offered at $122 per tonne on GlobalOre, with a bid of $119,
traders said. Another 90,000-tonne cargo of Australian
58-percent grade iron ore was offered at $111, with a bid at
$109.

Shanghai rebar futures and iron ore indexes at 0707 GMT

Contract Last Change Pct Change
SHFE REBAR MAY3 3660 -72.00 -1.93
PLATTS 62 PCT INDEX 118.5 +1.00 +0.85
THE STEEL INDEX 62 PCT INDEX 117.5 +2.20 +1.91
METAL BULLETIN INDEX 118.71 +0.92 +0.78

Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1=6.2547 Chinese yuan)

(Reporting by Manolo Serapio Jr.; Editing by Ron Popeski)