* Shanghai rebar, hot-rolled coil snap 3-day fall
* DCE iron ore recovers, SGX iron ore little changed
* Benchmark spot 62% iron ore sinks to 5-1/2-mth low
By Enrico Dela Cruz
MANILA, Aug 29 (Reuters) - Rebar steel futures in China rebounded from five-month lows in early trade on Thursday on hopes of improved demand for the construction material in the near term.
The most-active rebar contract, with January 2020 expiry, rose as much as 1.6% to 3,340 yuan ($470.90) a tonne on the Shanghai Futures Exchange.
Hot-rolled coil, the steel used in cars and home appliances, also recovered from a three-day fall, gaining as much as 1.8% to 3,620 yuan a tonne.
Steel glut in China and seasonally weak domestic demand for the metal weighed on prices in recent weeks, including those of steelmaking raw materials.
The slump in steel prices along with higher cost of raw materials — iron ore still trades above 2018 price levels despite its pullback from five-year highs — are putting strain on the profitability of Chinese steel mills.
Some of them have thus decided to reduce output to prop up prices and curb production costs, while waiting for steel demand to pick up.
“For now, maybe we will see the market getting stable for a short period,” a Shanghai-based trader said. “At the moment, many market players are just doing nothing except monitoring the market.”
Some steel mills, he said, have taken a cautious stance in buying raw materials. “Some of our clients told us they are not going to buy any spot (iron ore) cargoes at the moment while prices are still volatile.”
There is, however, still some downstream demand at present that is providing support for steel prices, the trader said.
“But we need to see the situation in the next few weeks,” he said. “Normally, the period between end-September and November is when some new demand comes into the market.”
* The most-traded iron ore on the Dalian Commodity Exchange , also for delivery in January 2020, gained as much as 2.2% to 592.50 yuan a tonne, recovering from a 2-1/2-month low hit on Wednesday amid hopes of fresh economic stimulus in China.
* Benchmark 62% iron ore for delivery to China SH-CCN-IRNOR62, as assessed by SteelHome consultancy, fell further on Wednesday, hitting a 5-1/2-month low of $85 a tonne. It scaled a five-year peak at $126.50 on July 3.
* “We may see some support for iron ore between $80 and $90,” the steel trader in Shanghai said.
* Deteriorating Sino-U.S. trade ties and interest rate reforms are fuelling speculation China will start cutting key rates from next month, but bankers expect borrowing costs to come down only gradually, offering limited support for the slowing economy.
* Other steelmaking inputs were trading higher, with Dalian coking coal rising as much as 1.3% at 1,308 yuan a tonne, while coke advanced 1.7% to 1,890 yuan.
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($1 = 7.0928 yuan)
Reporting by Enrico dela Cruz; editing by Uttaresh.V