China steel futures inch up amid signs of output cuts

* Shanghai rebar futures up 1.7 pct

* Iron ore dips again on Tuesday as stockpiling slows

* Output at major mills dips in mid-Oct, easing glut worries

By David Stanway

BEIJING, Oct 29 (Reuters) - Despite another fall in iron ore

prices overnight, China steel futures rose on Wednesday amid

indications that chronic oversupply problems in the industry

could be easing slightly.

The most traded rebar contract on the Shanghai Futures

Exchange ended the day up 1.7 percent at 2,589 yuan per

tonne. The most active iron ore contract on the Dalian Commodity

Exchange also rose 1.15 percent to end at 528 yuan.

China Iron and Steel Association (CISA) data on Tuesday

suggested that big steel mills were starting to cut back

production, with daily output rates over Oct. 11-20 dropping 2

percent compared to the previous 10-day period. Mill inventories

also fell slightly.

Longstanding oversupply problems continue to preoccupy the

sector, with CISA saying at a press briefing on Wednesday that

apparent crude steel consumption actually fell 0.9 percent in

the first three quarters of the year, despite a 2.34 percent

rise in output over the same period.

Much of the surplus has been diverted to overseas markets,

but CISA warned that although exports were set to exceed 80

million tonnes this year, they were likely to be hit by rising

"trade friction".

The sector is also paying close attention to the precise

impact of anti-pollution restrictions set to kick in on Nov. 1

ahead of the Asia-Pacific Economic Cooperation (APEC) summit in

Beijing.

Benchmark 62 percent iron ore for immediate delivery into

China fell 1 percent on Tuesday to $78.8 per

tonne, continuing to shed gains made earlier this month and

inching toward the five-year low set in late September.

ANZ Bank said stockpiling by Chinese steelmakers was slowing

as they prepare to scale back production ahead of the APEC

summit, forcing traders to lower their offering price.

Meanwhile, Credit Suisse (NYSE: CS - news) estimated that 20-30 percent of

output could potentially be affected if pollution worsens during

APEC, adding that it was likely that mills would delay their

production schedules until after the summit.

Steel mills have been downplaying the impact of the

potential capacity cuts, with a sales manager at the

privately-owned Tangshan Ganglu Iron and Steel saying

inventories at most firms were sufficient to cover any

disruptions.

"As for the whole market, we think it is generally immune

from the temporary restrictions, and there won't be many ups and

downs," she said.

Rebar and iron ore prices at 0704 GMT

Contract Last Change Pct Change

SHFE REBAR MAY5 2589 +44.00 +1.73

DALIAN IRON ORE DCE DCIO MAY5 528 +6.00 +1.15

THE STEEL INDEX 62 PCT INDEX 78.8 -0.80 -1.01

METAL BULLETIN INDEX 79.22 -0.30 -0.38

Dalian (Shanghai: 600747.SS - news) iron ore and Shanghai rebar in yuan/tonne

Index in dollars/tonne, show close for the previous trading day

(Editing by Sunil Nair)