Iron Ore-Shanghai rebar slips for 3rd day, ore near 2-1/2 yr low

* China steel prices may not have room to fall further
-analyst
* Miners continue to sell spot iron ore cargoes

By Manolo Serapio Jr
SINGAPORE, Aug 15 (Reuters) - Shanghai steel futures dropped
for the third day in a row on Wednesday, putting more pressure
on iron ore prices which languished near 31-month lows as weak
steel demand curbed appetite for the raw material.
But with spot iron ore prices having fallen 24 percent and
Chinese steel down 16 percent from their 2012 peaks, some
analysts and traders are starting to think both markets could
soon hit bottom on expectations demand may pick up in the fourth
quarter.
The most-traded rebar for January delivery on the Shanghai
Futures Exchange was off 0.3 percent at 3,655 yuan
($570) a tonne by 0533 GMT. The contract hit a record low of
3,631 yuan earlier this month.
"Right now, steel prices don't have much room to fall
further, and (current levels) may also be the bottom for iron
ore," said Henry Liu, head of commodity research at Mirae Asset
Securities in Hong Kong.
"But even if we see some improvement in demand, a strong
rebound in prices is unlikely. There's still a lot of steel
inventory to digest and overcapacity in China."
Inventory of five major steel products in China, including
rebar and hot-rolled coil, held by traders, stood at 15.1
million tonnes at the end of last week, 9.4 percent more than a
year ago, based on data compiled by Bank of America-Merrill
Lynch.
Steel demand in China, the world's biggest consumer and
producer, is slowing along with the economy which grew at its
weakest pace in more than three years in the second quarter.
Disappointing trade and industrial output data last week
suggested the slowdown may have extended to July.

BULLISH FOR Q4
China's slowdown has weighed most on iron ore, the price of
which is mainly driven by its biggest importer.
Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI stood at $113.30 a tonne on Tuesday, according to
Steel Index, a day after hitting $112.90, its lowest since Dec.
29, 2009.
The price of the steelmaking ingredient has fallen in 22 of
the past 25 trading sessions.
"I don't think prices have bottomed. I think they have room
to go down further. But I'm bullish for the fourth quarter,"
said an iron ore trader in Hong Kong.
"The China stimulus will be felt in Q4 and that will lift
iron ore prices."
China cut interest rates in June and July and slashed banks'
required reserve ratio three times since November to boost
lending and stimulate its economy. Analysts expect more of
those, or even more aggressive, steps after trade and new bank
lending data last week suggested pro-growth policies have been
slow to gain traction.
Robust Chinese demand for iron ore fueled a tripling in
prices to near $200 in early 2011 from 2008, as Beijing's
urbanisation bid meant huge demand for steel.
But now iron ore is underperforming other China-focused
commodities, such as copper, which has only dropped by
around 2 percent this year versus iron ore's 18 percent slump.
Despite falling prices, miners continue to push out spot
cargoes, with top iron ore producer Vale selling two
cargoes via separate tenders on Wednesday.
Vale is offering 90,791 tonnes of 64.11-percent grade
Brazilian iron ore lump and another 176,800 tonnes of Brazilian
Carajas iron ore fines, traders said.
Vale sold a similar Carajas material on Monday at $123.51 a
tonne, including freight. Last week, Vale sold about seven
cargoes on the spot market estimated at more than 1 million
tonnes, traders said.
Second-ranked iron ore miner Rio Tinto is
offering 165,000 tonnes of 58 percent-grade Australian
Yandicoogina fines, also at a tender closing on Wednesday,
traders said.

Shanghai rebar futures and iron ore indexes at 0533 GMT

Contract Last Change Pct Change
SHFE REBAR JAN3 3655 -11.00 -0.30
PLATTS 62 PCT INDEX 114 -0.50 -0.44
THE STEEL INDEX 62 PCT INDEX 113.3 +0.40 +0.35
METAL BULLETIN INDEX 114.75 +0.63 +0.55

Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day

($1 = 6.3586 Chinese yuan)

(Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)