* Slump in steel prices causes losses for some mills
* Mills increase iron ore restocking in prep for higher
(Updates close prices)
SHANGHAI, Sept 20 Chinese steel futures rose on
Tuesday on expectations that demand in the world's biggest
producer and consumer would pick up before a weeklong holiday in
early October, helping to lift prices of key raw material iron
ore as well.
End-users of steel - such as construction companies - are
expected to pick up restocking ahead of a national holiday
between Oct. 1-7, and that is expected to support a technical
recovery from the three-month low hit on Monday.
The sharp slump in prices since the end of August - more
than 6 percent - has caused some steel companies to lose money.
"Steel prices have slumped to below production costs for
some mills so this can't last, while there is also hope for
pre-holiday restocking," said Xia Junyan, an investment manager
at Hangzhou CIEC Trading Co in Shanghai.
The most-traded rebar on the Shanghai Futures Exchange
rose 1.3 percent to 2,264 yuan ($339.42) a tonne by
close. The construction steel product dropped to a session low
of 2,190 yuan ($328) on Monday, the weakest since June 29.
Steel demand typically improves in the autumn season of the
Northern Hemisphere as construction activities - the main
consumer of the metal - pick up after a summer slowdown.
However, the autumn recovery has appeared more slowly than
expected this year.
Iron ore was trending higher as steel mills were
replenishing stocks of the raw material. Iron ore on the Dalian
Commodity Exchange rose 1.9 percent to close at 397.5
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI
edged down 20 cents to $55.3 a tonne on Monday, according to The
($1 = 6.6702 Chinese yuan)
(Reporting by Ruby Lian and Josephine Mason; Editing by Tom
Hogue and Biju Dwarakanath)