Iron Ore-Shanghai rebar hits record low on Europe worries; ore eases

* Shanghai rebar hits record low of 3,631 yuan
* Market fundamentals remain shaky
* Iron ore prices fall, mills on the sidelines

(Updates Shanghai rebar price, adds iron ore comment)
SHANGHAI, Aug 3 (Reuters) - Chinese steel futures fell more
than 1 percent to a record low on Friday, as the European
Central Bank disappointed investors looking for imminent action
to boost growth and combat the euro zone's debt crisis.
The most-traded January Shanghai rebar futures contract
touched a low of 3,631 yuan ($570) a tonne at the
market open, down 1.1 percent from the previous day, though had
rebounded to close at 3,672 yuan.
Asian markets mostly fell on Friday, with risk aversion
growing on the ECB's inaction.
Steel prices in China have dropped 17 percent from early
April as cooling growth in the world's second-largest economy
and the protracted euro zone crisis hit demand, forcing some
steel makers to step up maintenance in order to cut output.
"The actual production cuts by Chinese steel mills are too
low to support prices when demand remains poor, particularly
during a weak summer season," Lu Xiaohua, an analyst with
Everbright Futures in Shanghai said.
"Mills will not be desperate to slash output until prices
fall to their current marginal costs of 3,500 yuan. And any
pro-economic measures may trigger a rapid recovery in
production, with the overhang capping gains in prices."
Relatively strong readings for China's purchasing managers
index (PMI) reflected long-term optimism the country's maturing
economy will support more services and consumption.

A sub-index tracking the construction services industry rose
by 2.3 points to 60.4, reflecting a loosening of the tight grip
on the property sector, one of the largest steel consumers.
Analysts and traders said these factors would take several
months to filter through to the steel industry, however, and
that steel demand would remain faltering without an imminent
large-scale investment into infrastructure.
Iron ore with 62 percent iron content .IO62-CNI=SI fell
0.26 percent to $117.2 a tonne on Thursday, ending two sessions
of gains, according to the Steel Index.
Steel mills showed little buying interest, and the best bid
for an Australian fines cargo on trading platform Globalore was
$114.5 a tonne, $3 lower than the offer after having traded at
$120 on Wednesday, the Steel Index said.
Metal Bulletin Iron Ore Index .IO62-CNO=MB, one of the
three major global index publishers, expects i ron ore prices to
average close to $120 a tonne for August.
"Given weak fundamentals and a poor global economic outlook
we do not expect prices to increase above $130 a tonne...any
downside will be supported at $115 a tonne as more supply is
knocked out of the market," it said in a research note.
Shanghai rebar futures and iron ore indexes at 0700 GMT

Contract Last Change Pct Change
SHANGHAI REBAR* 3672 2.00 0.05
PLATTS 62 PCT INDEX 117.25 -0.25 -0.21
THE STEEL INDEX 62 PCT INDEX 117.1 -0.30 -0.26
METAL BULLETIN INDEX 119.19 0.06 0.05

*In yuan/tonne
#Index in dollars/tonne, show close for the previous trading day
($1 = 6.3674 Chinese yuan)

(Reporting by Ruby Lian and Fayen Wong; Editing by Joseph
Radford and Ed Davies)