July 14, 2015 / 7:48 AM / 2 years ago

UPDATE 1-Dalian iron ore rises, near-term steel restocking seen

* Shanghai rebar erases gains as shares fall

* Spot iron ore steady at just below $50/tonne

* Vale to replace higher cost output, but keeps 2015 target (Adds Citi comment, China stocks, updates prices)

By Manolo Serapio Jr

MANILA, July 14 (Reuters) - Chinese iron ore futures edged up on Tuesday, backed by hopes traders would rebuild steel stockpiles after a recent price rout and ahead of seasonal peak demand.

Firmer futures may push benchmark spot iron ore higher later in the day, having stabilised at close to $50 a tonne on Monday after last week's dive, along with Chinese equities, to a 10-year low.

The most-traded September iron ore contract on the Dalian Commodity Exchange closed higher 0.5 percent at 369.50 yuan ($60) a tonne, recoiling from a session high of 376 yuan as Chinese equities fell after a three-session rebound.

Rebar for October delivery on the Shanghai Futures Exchange eased 0.3 percent to 2,007 yuan a tonne. It came off the session's peak of 2,033 yuan, but still above last week's all-time trough of 1,891 yuan.

China's slowing economy, forecast to have grown at a six-year low of 6.9 percent in the second quarter, and a cooling property sector have hit demand for steel which shrank around 5 percent in January-May, roiling prices and squeezing mills' margins.

"Looking ahead, the steel restocking demand ahead of September peak season and recovery of housing market will help revive domestic demand," Argonaut Securities analyst Helen Lau said in a note, referring to top steel consumer China.

A drop in iron ore prices to below $50 a tonne also spurred some buyers, including Chinese mills looking to replenish inventories, traders said.

Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI was unchanged at $49.90 a tonne on Monday, according to The Steel Index (TSI). The benchmark touched $44.10 last week, the lowest on record since TSI began compiling the data. Based on annual pricing that preceded the current spot-based system, it was the lowest since 2005, according to data compiled by Goldman Sachs.

Faced with tumbling prices, Vale, the world's largest iron ore producer, will replace 25 million tonnes a year of higher-cost production with cheaper tonnes. But the Brazilian miner said it will keep its 2015 production goal of 340 million tonnes.

"In the absence of cuts from major Australian miners, the burden falls on Vale to cut additional tonnage. However, single-handedly attempting to balance the market is unlikely to be attractive and we therefore do not expect that iron ore's oligopolistic market structure will prevent iron ore prices from falling below $40/tonne," Citigroup said in a note. ($1 = 6.2088 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Subhranshu Sahu)

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