CORRECTED - CORRECTED-UPDATE 2-Nippon Steel lifts forecast, shares perk up

(Corrects to add missing word "whether" to fund manager quote in paragraph 5)

* Raises full-year recurring forecast to Y20 bln from nil

* New profit forecast above consensus of 13.5 bln yen

* Q2 recurring loss 30.3 bln yen vs 118.15 bln profit yr ago

* Q2 loss narrows from Q1's 56.67 bln yen loss

* Stock up 1.5 pct after results, Nikkei down 1.5 pct

TOKYO, Oct 29 (Reuters) - Nippon Steel Corp (5401.T), the world's No.2 steelmaker, booked a third consecutive quarterly loss but raised its full-year outlook amid a recovery in exports to Asia and demand from the auto industry.

Shares of Nippon Steel rose 1.5 percent to 344 yen after the results, bucking a 1.5 percent fall in the Nikkei average .N225

China's near-$600 billion stimulus package has revived the region's steel industry, but subsequent production boosts by Chinese mills and their rising inventories are worrying global steelmakers. They say China could ramp up its exports and damage the balance in the market.

Nippon Steel's earnings recovery has been slower than its domestic rival JFE Holdings Inc (5411.T) as trouble at a mill in August curbed output at a time when demand from exports was strong. In addition, a shutdown until August at another mill, one of its most efficient, raised Nippon Steel's cost base.

"The outlook is neither positive or negative, so the points are whether its stock price is cheap and the momentum of its business," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

"The current stock price is not so expensive, but the macro conditions are not good enough to encourage buying it up. I expect it to move in a range of 300 to 400 yen."

Nippon Steel -- which trails ArcelorMittal (ISPA.AS) and competes with the world's No.3 Baoshan Iron and Steel Co (600019.SS) and No.4 POSCO (005490.KS) in Asia -- said on Thursday its recurring loss, which is before tax and and special items, came to 30.3 billion yen ($334 million) in July-September.

The loss was smaller than the previous quarter's 56.7 billion yen loss and its own forecast of 53.3 billion yen loss. The company booked a profit of 118.15 billion yen a year earlier.

Nippon Steel raised its forecast for the year to March 2010 to 20 billion yen from a prior estimate for nil profit. The new forecast is above a market consensus estimate of a profit of 13.5 billion yen in a poll of 17 analysts by Thomson Reuters I/B/E/S.

Japanese steelmakers' profits will be well below those of Asian peers this year as lower costs of raw material inputs such as iron ore and coking coal triggered big inventory writedowns mostly in April-June. The Japanese have tougher asset impairment accounting rules than their rivals. (Reporting by Yuko Inoue and Taiga Uranaka; Editing by Lincoln Feast)