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Iron ore pulls back, but support seen from China's shrinking steel stocks

* Dalian, SGX iron ore prices slip after record-setting rally

* China’s inventories of major steel products drop steadily

* White-goods demand stokes China manufacturing, metals use

MANILA, Dec 1 (Reuters) - Iron ore futures slipped on Tuesday, with Dalian prices retreating after a four-session rally that propelled the benchmark contract to the year’s highest level driven by strong Chinese demand for the steelmaking ingredient.

The most-traded iron ore for January delivery on China’s Dalian Commodity Exchange dropped 0.1% to 905 yuan ($137.57) a tonne by the midday break. The most-active January contract on the Singapore Exchange lost 0.3% to $125.71 a tonne.

Market enthusiasm over falling steel and iron ore stockpiles in China was tempered somewhat by an anticipated slowdown in winter demand in the world’s top metals consumer, analysts said.

China’s steel inventories have declined substantially from a seasonal record high of 12.92 million tonnes to just slightly above the five-year seasonal average of 10.46 million last week, OCBC Bank economist Howie Lee said.

Strong end-user demand and the recent shutdown of some plants in China’s top steelmaking city of Tangshan may have led to the rapid drawdown in stocks, Lee said.

Spot iron ore on Monday scaled the highest level since January 2014 at $131.50 a tonne, according to SteelHome consultancy. SH-CCN-IRNOR62

China's iron ore port inventories have declined for two consecutive weeks, after a five-month long stockpiling, Lee added. SH-TOT-IRONINV

“Steel margins are comfortable at present and the breakeven parity for iron ore is currently estimated at $150 per tonne,” he said.

FUNDAMENTALS

* Booming sales of fridges, toasters and microwaves to households across the world have helped propel China’s mammoth manufacturing engine back to life, super-charging demand for steel.

* Construction steel rebar on the Shanghai Futures Exchange dropped 0.6%, while hot-rolled coil was flat. Stainless steel slumped 1.2%.

* Coking coal rose as much as 3.2%, while coke climbed 1.1%, supported by the tight supply of steelmaking ingredients.

Reporting by Enrico Dela Cruz; Editing by Shounak Dasgupta

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