* Dalian iron ore recovers from near 2-pct drop, rebar higher
* Recent gains in iron ore prices overdone -ANZ
* China July crude steel output falls 4.6 pct yr/yr (Updates prices)
By Manolo Serapio Jr
MANILA, Aug 12 (Reuters) - Dalian iron ore futures reversed losses to finish higher on Wednesday on hopes demand for the steelmaking raw material would remain high as China's steel exports get a boost from Beijing's devaluation of the yuan.
China allowed the yuan to fall sharply for a second straight day on Wednesday, cutting investor appetite for risky assets from equities to most commodities.
But Chinese iron ore futures recovered from intraday losses. The most-traded iron ore for January delivery on the Dalian Commodity Exchange closed up 0.4 percent at 377.50 yuan ($59) a tonne, after falling as much as 1.9 percent earlier.
"Chinese mills will look to export more steel products with the devaluation of the yuan. That will support demand for iron ore," said a Shanghai-based trader.
China exported 9.73 million tonnes of steel products in July, up 21 percent from a year ago, and near the record high of 10.29 million tonnes in January.
Shrinking domestic demand amid a slowing economy has fueled brisk steel exports from the country, with some Chinese steelmakers said to be selling output abroad at a loss, sparking anger from producers elsewhere.
China's crude steel output fell 4.6 percent to 65.84 million tonnes in July from a year ago.
On Tuesday, iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI slipped 0.7 percent to $55.90 a tonne, according to The Steel Index, after scaling a one-month high of $56.40 last week.
"We believe the recent gains in iron ore prices are overdone as supply builds further in the second half of 2015," ANZ Bank said in a note.
ANZ said it initiated a short position with iron ore expected to test $50 in the short term amid slowing steel demand in China.
Adding to more supply from Australia and Brazil, India's top iron ore exporting state of Goa resumed production on Monday after nearly three years, led by Vedanta Ltd, India's largest private miner.
The January rebar contract on the Shanghai Futures Exchange rose 0.5 percent to 2,071 yuan a tonne.
But spot rebar prices remain higher, at around 2,300 yuan a tonne in Shanghai, the trader said, on expectations of tighter supply when Beijing curbs production to clear skies ahead of a big parade in September to commemorate the 70th anniversary of the end of World War Two.
Global miner Rio Tinto will offer 100,000 tonnes of 61-percent grade Pilbara iron ore fines at a tender closing on Wednesday, traders said.
$1 = 6.4466 Chinese yuan Reporting by Manolo Serapio Jr.; Editing by Joseph Radford and Biju Dwarakanath