* Dalian iron ore up 1.1 pct, Shanghai rebar also gains
* Spot iron ore steady at just below $50/tonne
* Vale to replace higher cost output, but keeps 2015 target
By Manolo Serapio Jr
MANILA, July 14 (Reuters) - Chinese iron ore futures climbed more than 1 percent on Tuesday as steel prices recovered on hopes traders would rebuild stockpiles after a recent 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 was up 1.1 percent at 371.50 yuan ($60) a tonne by midday, after touching a record low of 333 yuan on July 9.
Steel futures also rose. Rebar for October delivery on the Shanghai Futures Exchange gained 0.5 percent to 2,022 yuan a tonne, distancing further from 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.
“The shift in focus towards maximising margins, rather than maintaining volume at any cost, may provide some support to prices in near term,” ANZ Bank said in a note.
But the Brazilian miner said it will keep its 2015 production goal of 340 million tonnes. ($1 = 6.2079 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Subhranshu Sahu)