* Chinese markets reopen on Tuesday after week-long break
* Iron ore steadied at $131.40/tonne last week
By Manolo Serapio Jr
SINGAPORE, Oct 7 (Reuters) - Greater supply of iron ore and a subdued Chinese steel market may weigh on prices for the steelmaking raw material when China reopens after a week-long holiday.
Trading in both iron ore physical and swaps markets remained thin on Monday, a day before Chinese markets resume trading.
Benchmark 62-percent grade iron ore .IO62-CNI=SI for delivery to top market China stood at $131.40 a tonne over the past week, based on data compiled by Steel Index.
"There's a bit of concern over more availability of spot iron ore from miners so traders are not in a hurry to take on any positions," said a Hong Kong-based trader.
Iron ore exports to China from Australia's Port Hedland, which handles about a fifth of the global seaborne iron ore market, rose 3.2 percent to just under 23 million tonnes in September from August.
Global miners have been ramping up output confident Chinese demand will remain brisk. Rio Tinto loaded the first shipment of iron ore from its expanded annual capacity in Australia of 290 million tonnes in September and has said a further expansion of its port, rail and power infrastructure is underway towards a planned 360 million tonnes capacity.
Traders will be eyeing Shanghai rebar futures on Tuesday. They hit a 12-week low of 3,570 yuan ($580) a tonne shortly before Chinese markets closed for the National Day holiday amid rising steel stockpiles.
"Some of the Chinese expect a move down during the re-opening tomorrow. We have probably been sitting on the bullish side for the past couple of weeks given the low inventories for iron ore at ports and sustained appetite for steel," said an iron ore swaps broker in Singapore.
"But we're beginning to think a small sell-off might be the likeliest scenario. Rebar is so fickle it always does the opposite of what you fundamentally expect it to do."
There may also be pressure on Chinese commodities and equities as some investors shy away from riskier assets due to the nearly week-long U.S. budget impasse. Concern is mounting that the stalemate could drag on and undermine moves to increase Washington's borrowing limit by an Oct. 17 deadline, raising the possibility of a sovereign bond default.
$1 = 6.1220 Chinese yuan Reporting by Manolo Serapio Jr.; Editing by Joseph Radford