* Prices buoyed by stricter rules on building new steel capacity
* But outlook clouded by slow winter demand
* Raw materials down as mills yet to restock
SHANGHAI, Jan 11 (Reuters) - Chinese steel futures rose for a third day on Thursday after Beijing ramped up efforts to restrict new steel production to sap overcapacity and help clear pollution, but worries over demand capped gains.
The most active rebar on the Shanghai Futures Exchange had climbed 0.3 percent to 3,844 yuan ($590.17) a tonne by midday.
China has issued stricter rules on building new steel production capacity to replace obsolete facilities, a move that helped push steel prices into positive territory this week.
“The latest government rules to rein in building new capacity continued to restore sentiment, and there are signs of steadiness - at least for semi-finished steel prices - this week after a big dive a week ago,” said Kevin Bai, an analyst with CRU in Beijing.
But slower winter demand will continue to weigh on prices before the Lunar New Year holidays next month, Bai added.
Physical prices for rebar dropped 350 yuan to 3,960 yuan a tonne last week, according to CRU assessment.
Iron ore on the Dalian Commodity Exchange on Thursday had dropped 0.4 percent to 556 yuan a tonne.
Coke fell 0.8 percent to 2,024 yuan a tonne, while coking coal edged down 0.2 percent to 1,364 yuan a tonne.
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB dipped $0.16 to $78.31 a tonne on Wednesday, according to Metal Bulletin. ($1 = 6.5134 Chinese yuan renminbi) (Reporting by Ruby Lian and Josephine Mason; Editing by Joseph Radford)