UPDATE 1-China steel futures down 2.4 pct on week as caution prevails

* Rebar futures inch down on Friday after heavy Thursday
losses
* Weak manufacturing data cuts short four-day iron ore price
rally
* Analysts say substantial recovery unlikely in week ahead

(Recasts to show weekly change, adds final Friday rebar price)
By David Stanway
BEIJING, Sept 21 (Reuters) - Shanghai steel rebar futures
ended the week 2.4 percent lower on Friday, their mid-week rally
offset by the heaviest daily fall ever on Thursday, with traders
and end users still worried about demand even as the peak usage
season approached.
The most traded rebar contract for January delivery
ended Friday at 3,477 yuan ($550) per tonne, edging up from a
low of 3,436 yuan during volatile early trade to close 6 yuan
down on the day, but few traders expect any substantial recovery
ahead of China's Oct. 1 week-long national holiday.
"Steel plants still need to buy, but they are being careful
and controlling volumes. Many are staying away because they are
reducing risks especially before the holiday and the 18th Party
Congress," said a southern China-based trader.
China's ruling Communist Party is expected to convene in
mid-October and traders hope that a once-in-a-decade change of
leadership could also usher in new measures aimed at boosting
the flagging economy.
Responding to disappointing manufacturing data, Shanghai
rebar futures shed more than 4 percent on Thursday, their
biggest daily drop ever, putting an end to a solid two-day
recovery that pushed prices up to their highest in over a month.
Global iron ore prices also ended their four-day rally on
Thursday, with Metal Bulletin's index .IO62-CNO=MB dipping
$1.74 to $110.96 a tonne.
"We have seen recently that traders have been looking for
good news, with the central government's infrastructure
investment and then the U.S. stimulus, but the impact has not
been lasting," said the trader.
The global market is looking to China, by far the world's
biggest iron ore consumer and steel producer, to take the lead
in propping up the sector, but analysts said there was little
hope of any substantial new stimulus, and little chance that
over producing local mills would reduce output.
"The problem is that every time prices recover, the mills
just start to produce more steel again," said Xu Zhongbo, head
of Beijing Metal Consulting.
Xu said there was still a severe shortage of money in the
economy, especially among local governments reeling from a
decline in land sales, and a big surge in steel demand was
unlikely even in the coming peak season.
Even if demand does improve in October, the impact on prices
could be limited by lingering oversupply issues. Hebei Iron and
Steel, China's biggest steel producer, said on Thursday that it
would raise the October delivery prices of its hot-rolled coil,
but other products would remain unchanged or even see cuts.

Beijing said earlier this month that it would invest more
than $150 billion in new infrastructure projects but it was
little more than a "paper" stimulus, said Xu, and the entire
industrial chain -- from iron miner to steel mill -- was still
facing its worst winter ever.
Although iron ore prices have recovered from their
three-year lows early this month, there was still room for
further declines, said Cameron Hunt, director of Metal
Bulletin's iron ore index.
"There is not much supply constraint for imported material,
so lower prices would impact on high-cost domestic material more
than imported volumes. We believe that there is downward room
for prices," Hunt said.
Shanghai rebar futures and iron ore indexes at 0700 GMT

Contract Last Change Pct Change
SHANGHAI REBAR* 3477 -6.00 -0.17
PLATTS 62 PCT INDEX 109.75 -4.25 -3.73
THE STEEL INDEX 62 PCT INDEX 109.1 -0.40 -0.37
METAL BULLETIN INDEX 110.96 -1.74 -1.54

*In yuan/tonne
#Index in dollars/tonne, show close for the previous trading day
($1 = 6.3038 Chinese yuan)

(Editing by Ed Davies and Miral Fahmy)