January 4, 2017 / 5:34 AM / 8 months ago

China iron ore eases on weaker demand, higher stocks

* Iron ore stocks rise again last week

* Steel, iron ore turnover on Tuesday lowest in more than a year

By Josephine Mason and Muyu Xu

BEIJING, Jan 4 (Reuters) - Chinese iron ore prices eased again on Wednesday amid continued concerns about demand and rising stocks, while steel rebar prices rose almost 1 percent snapping back from six-week lows in a technical correction.

Falling for a third straight session, iron ore on the Dalian Commodity Exchange was down 0.5 percent at 548.0 yuan ($78.80) a tonne at 0516 GMT.

Domestic stocks CUS-STKTOT-IORE remain at 2-1/2-year highs, rising by 90,000 tonnes last week to almost 11 million tonnes.

"The pullback results from the big amount of inventory, whereas the downstream market is not active," said Liu Xinwei, steel analyst at China Sublime Information Group, pointing to the drop-off in construction activity during winter months.

The most-active rebar contract for May delivery on the Shanghai Futures Exchange was up 0.9 percent at 2,941 yuan per tonne.

Average metal inventory at steel mills is between 8 and 10 days, significantly better than a month ago when stockpiles could only support one day's needs, according to China Sublime.

Turnover has been low after the new year holiday and ahead of China's week-long Lunar New Year holiday at the end of January.

On Wednesday, 2.7 million lots of steel changed hands, the lowest daily volume since mid-December 2015 and just 1.01 million contracts of iron ore traded, the smallest amount since June 2015.

A prolonged bout of toxic smog across the north of the country has renewed concerns about slower manufacturing output, forcing forcing hundreds of factories including steel mills to scale down production or close completely.

The government continues its crackdown on outdated capacity in a bid to curb excess output, saying on Tuesday that it would impose higher power prices on mills using outdated equipment. ($1 = 6.9539 Chinese yuan renminbi) (Reporting by Josephine Mason and Muyu Xu; Editing by Richard Pullin)

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