* Dalian iron ore rises as much as 2.4 pct, Shanghai rebar
* Iron ore demand from midsize Chinese mills healthy -
* China July HSBC services PMI at lowest in nearly nine
By Manolo Serapio Jr
SINGAPORE, Aug 5 Steel and iron ore futures in
China climbed to their highest levels in more than two weeks on
Tuesday, buoyed by hopes that government efforts to stimulate
the economy would spur demand for the two commodities.
China has since April been steadily fuelling economic
activity by reducing the amount of cash that some banks have to
hold as reserves to increase lending, instructing regional
governments to quicken spending, and hastening the construction
of railways and public housing.
Chinese steel and iron ore futures stretched gains from
Monday even as equities retreated after racing to 7-1/2-month
peaks after a dismal survey on the country's services sector.
The HSBC/Markit China services purchasing managers' index
fell to 50 in July, the lowest reading since November 2005,
indicating a recovery in the broader economy is still fragile
and may need further government support.
The most-traded rebar contract for January delivery on the
Shanghai Futures Exchange hit a session peak of 3,123
yuan ($506) a tonne, its highest since July 17. It finished up
0.6 percent at 3,102 yuan.
Iron ore for delivery in January on the Dalian Commodity
Exchange, the most active contract, rose to 692 yuan a
tonne, a level last seen on July 18, before also paring gains at
the close to 684 yuan, up 1.2 percent.
While supply from top Australian and Brazilian miners
remains brisk "demand from Chinese mills is also quite healthy",
said a Shanghai-based iron ore trader.
"There's no lack of offers in the market but we continue to
see interest from medium-sized mills to buy forward cargoes," he
Some bigger mills were still offloading cargoes from their
long-term contracts, said the trader who sold two capesize iron
ore cargoes on behalf of mills in northern China in July and is
working on another cargo this month.
Top miner Vale is offering to sell via a tender
42,111 tonnes of 63.17 percent-grade iron ore arriving in China
in early September, traders said.
Stocks of imported iron ore at China's ports fell for a
second straight week to 111.55 million tonnes on Aug. 1,
according to industry consultancy SteelHome.
The level has dropped from a record high 113.7 million
tonnes reached in early July but remained 29 percent up for the
Commonwealth Bank of Australia said there needs to be "a
more substantive decrease in port stocks to outweigh the supply
impulse coming through at the moment".
"We expect iron ore prices to firm later in the year but in
the short term believe it will struggle to lift without a
stronger turnaround in the levels of iron ore port stocks," the
bank said in a note.
Iron ore for immediate delivery to China .IO62-CNI=SI rose
0.2 percent to $95.40 a tonne on Monday, according to data
compiled by Steel Index.
Rebar and iron ore prices at 0703 GMT
Contract Last Change Pct Change
SHFE REBAR JAN5 3102 +18.00 +0.58
DALIAN IRON ORE DCE DCIO JAN5 684 +8.00 +1.18
SGX IRON ORE FUTURES AUG 96.5 +0.33 +0.34
THE STEEL INDEX 62 PCT INDEX 95.4 +0.20 +0.21
METAL BULLETIN INDEX 95.17 -0.67 -0.70
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
(1 US dollar = 6.1756 Chinese yuan)
(Editing by Muralikumar Anantharaman and Anupama Dwivedi)