Asia Steel-China prices at 10-month top as mills raise prices

* Prices up 2 pct as mills continue to raise offer prices

* Construction steel futures at highest since March debut

By Miyoung Kim

SEOUL, Aug 6 (Reuters) - Chinese spot steel prices rose 1.9 percent this week to a 10-month high as major mills continued to raise their offer prices, boosting hopes for a further rally fed by the government's infrastructure-focused stimulus plan.

Prices of China's benchmark hot-rolled coil rose to around 4,052.5 yuan ($593) a tonne, the highest since early October and up nearly 2 percent from 3,980 last week in south and east China, data from Metal Bulletin showed.

For a graphic on China's steel prices, click: here

"Real demand pick-up is quite remarkable and is feeding the price rise even during the slow summer season, as ample liquidity injection by the government has boosted overall demand, especially construction and infrastructure steel," said a Chinese steel trader in Seoul.

Prices of long products, used in construction, led the rally, with Shanghai Futures Exchange rebar futures hitting their highest since their debut in late March.

Prices of reinforcing bar for September delivery SRBU9 rose 11 percent on the week to 4,858 yuan, hitting a record high of 4,931 earlier this week after a major domestic producer increased its spot offer price by around 15 percent on Sunday.

Jiangsu Shagang Group, China's largest private-sector steelmaker and a leading rebar producer, hiked its sales prices by around 15 percent on Sunday, industry consultancy Umetal said on Monday. [ID:nSHA371607]

Major mills have been steadily increasing prices in recent months: Wuhan Iron and Steel (600005.SS) plans to raise September prices for its major steel products by 700 to 1,600 yuan per tonne versus August, the official Shanghai Securities News reported on Thursday, citing trade sources. [ID:nSHA47035]

Baosteel (600019.SS), China's largest steel mill, is expected to raise September prices for its major hot-rolled and cold-rolled steel products by about 5 to 6 percent versus August tags, trade sources said. [ID:nSHA360423]

"Steel prices are surging...and many traders are now concerned that the momentum may not hold," said a Shanghai-based steel trader.

Robust steel production growth and a lagging price recovery in flat steel products, mainly used in automobiles and electronic goods, have led some traders to worry that the recent rally may pause.

Despite calls from the government that China needs to rein in steel output by 8 percent to 460 million tonnes this year, many mills are operating near full capacity and the China Iron and Steel Association now expects output will exceed 500 million tonnes this year, a level similar to 2008.

"Chinese steel production has recovered quite rapidly -- last month it reached record highs... Most of this has been due to China's stimulus packages," Ian Ashby, head of iron ore for BHP Billiton (BHP.AX) (BLT.L), said on Wednesday, adding that China's iron ore stocks were also easing back to historic levels on steady steel output growth. [ID:nSYD530268]

China's iron ore imports edged up in July to the second highest on record, according to the transport ministry, showing that the country's appetite for the steelmaking material is undiminished. [ID:nPEK360524] (Additional reporting by Alfred Cang in SHANGHAI; Editing by Michael Urquhart)