Iron Ore-Shanghai steel sags on demand woes, Baosteel cuts prices

* Baosteel lowers prices for the first time in 2012
* Iron ore firmer, but upside seen limited

(Updates rebar price)
By Manolo Serapio Jr
SINGAPORE, June 12 (Reuters) - Shanghai steel futures
slipped on Tuesday, weighed down by concerns demand in top steel
consumer China will remain weak through next month, prompting
major producer Baosteel to cut prices for the first time this
year.
Baosteel Group, the world's third biggest steelmaker and
parent of Shanghai-listed listed Baoshan Iron and Steel
, said it will cut prices of its main products by
around 4 percent in July.
Baosteel's pricing moves are seen as a bellwether for the
industry, and the last time it reduced prices was in December
2011, when Beijing's monetary tightening moves dented steel
demand.
The most traded rebar contract for October delivery on the
Shanghai Futures Exchange dropped 0.6 percent to close
at 4,100 yuan ($640) a tonne, falling for a second time in three
sessions.
The price cut sent Baosteel's share price falling more than
3 percent, although analysts and traders say it was hardly
surprising.
"It was expected because China is already in a slowdown. The
only concern now is whether demand will be slower than they have
expected," said an iron ore trader in Hong Kong.
Despite soft demand, China's legion of steel mills continued
to boost output, hoping to protect their market share in a
highly fragmented industry. That has supported prices of key raw
material iron ore as mills try to keep enough inventories.
The country, which produces around half of the world's
steel, made 61.234 million tonnes of crude steel in May, up 2.5
percent from a year ago and more than April's 60.575 million
tonnes, government data showed on Monday.
"We are seeing increasingly firm interest from buyers for
replenishing purposes," said the Hong Kong trader, referring to
iron ore.
"There are almost no traders out there taking positions now
because they feel the price upside moving forward is extremely
limited. However, downside is limited as well."
Miner BHP Billiton sold 58-percent grade
Yandi iron ore fines at $124 a tonne, including freight cost, on
Monday, the same level as late last week and a price "which a
lot of buyers are willing to buy," he said.
Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI gained 0.7 percent to $132.30 a tonne on Monday,
according to Steel Index, rising for a second straight day.
Indian iron ore exporter Sesa Goa is selling
70,000-80,000 tonnes of 54-percent grade iron ore lumps at a
tender on Tuesday, said a Singapore-based trader.
Sesa Goa is also selling the same volume of 56-percent grade
lumps at the same tender, he said.

Shanghai rebar futures and iron ore indexes at 0706 GMT

Contract Last Change Pct Change
SHFE REBAR OCT2 4100 -23.00 -0.56
PLATTS 62 PCT INDEX 134.25 +0.25 +0.19
THE STEEL INDEX 62 PCT INDEX 132.3 +0.90 +0.68
METAL BULLETIN INDEX 134.3 +0.42 +0.31

Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3694 Chinese yuan)

(Editing by Miral Fahmy)