10th trading day of the delivery month. UPDATE 1-Iron ore...

10th trading day of the delivery month.

UPDATE 1-Iron ore futures surge as rebar rally, physical buying support


* Dalian iron ore jumps as much as 4 pct
* Shanghai rebar up nearly 1 pct
* Increase in physical activity boosts iron ore - analyst

(Updates prices)
By A. Ananthalakshmi
SINGAPORE, Dec 30 Iron ore futures jumped as
much as 4 percent on Wednesday, while the overnight spot price
rose to a four-week high, boosted by an uptick in rebar futures
and an increase in physical buying activity.
The most-active May iron ore contract on the Dalian
Commodity Exchange rose to a session high of 324.50
yuan ($50.01) a tonne, before paring some gains to close up 2.9
percent at 321 yuan.
Iron ore for immediate delivery to China's Tianjin port
.IO62-CNI=SI was priced at $41.40 a tonne on Tuesday, up 2.2
percent from the previous session, according to The Steel Index.
Tuesday's price was the highest since Dec. 1.
"Iron ore futures have followed the uptrend in rebar prices.
There is also an improvement of buying activity in the spot
market," said Wang Di, an analyst with CRU in Beijing.
"Traditionally, seaborne supply decreases in January to
early February. Domestic buyers are purchasing now for future
needs fearing less supply," Wang said.
The price rally, however, will only be temporary as steel
mills in China continue to suspend or lower production, she
said.
As factories cut output, demand for raw material iron ore
drops.
Global oversupply and shrinking Chinese steel demand have
pummeled iron ore prices, with the spot rate of the steel-making
commodity down 42 percent this year. China's steel demand has
continued to decline this year after falling in 2014 for the
first time in more than three decades.
Iron ore could fall below $30 a tonne in the next few
months, forcing more high-cost suppliers out of business, a
Reuters poll showed earlier this month.
For now, it is getting some support from a year-end rally in
steel prices.
The most-traded May rebar contract on the Shanghai Futures
Exchange rose 0.9 percent to 1,780 yuan ($274.32) a
tonne.
Rebar has gained in recent days on expectations of a
near-term supply squeeze as mills cut production. Stockpiles are
also at historically low levels.
Stocks of rebar, a steel product used in construction, stood
at 3.636 million tonnes at 28 major cities in China on Dec. 25,
according to industry consultancy SteelHome. That is the lowest
since the data became available in 2011.
The recent price rally may be short-lived as underlying
demand for steel in China remains weak, analysts have said.

Rebar and iron ore prices at 0701 GMT

Contract Last Change Pct Change
SHFE REBAR MAY6 1780 +15.00 +0.85
DALIAN IRON ORE DCE DCIO MAY6 321 +9.00 +2.88
SGX IRON ORE FUTURES JAN 42.01 +0.09 +0.21
THE STEEL INDEX 62 PCT INDEX 41.4 +0.90 +2.22
METAL BULLETIN INDEX 42.31 +0.00 +0.00


Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading
day


($1 = 6.4888 Chinese yuan)

(Reporting by A. Ananthalakshmi; Editing by Christian
Schmollinger and Biju Dwarakanath)