Chinese iron ore slips, buyers cautious ahead of output cuts

* Iron ore down for fifth day in a row

* Steel futures inch up amid policy support

* Earnings announcements reveal mixed fortunes for steel

firms

By David Stanway

BEIJING, Oct 30 (Reuters) - Iron ore prices dipped further

overnight, with little sign that Chinese buyers would risk big

purchases, faced with uncertain demand and the risk of steel

capacity cuts for environmental reasons when a global summit is

held in Beijing in November.

Benchmark 62 percent iron ore for immediate delivery into

China fell 0.25 percent on Wednesday to $78.6 per

tonne, its fifth consecutive daily decline wiping out the gains

made during a brief rally in the middle of the month.

However, steel and iron ore futures continued to rebound on

Thursday, with the most traded rebar contract on the Shanghai

Futures Exchange ending the day at 2,590 yuan ($423.6)

per tonne, up 1 percent.

The most active iron ore contract on the Dalian Commodity

Exchange also rose 2.3 percent to 536 yuan, reflecting

improved sentiment after China's cabinet announced measures on

Wednesday designed to stimulate consumption in sectors such as

housing and new energy.

Some steel mills in Hebei, China's top steel-producing

province, have been asked to reduce or suspend production during

an Asia-Pacific Economic Cooperation summit in November to help

improve air quality in Beijing.

Traders initially believed the capacity reduction would help

thin supplies and provide support to steel prices, which have

been hovering close to record lows.

But with little positive news to drive demand and the winter

consumption lull approaching fast, few in the industry expect

any sustained improvement in the near term.

"The situation is expected to remain like this for some time

- there will only be small price changes and no big surprises,"

said Xu Zhongbo of Beijing Metal Consulting, who works with

Chinese steel mills.

"Debts are the big problem - the firms with no debts are

surviving and even making some money, but those having to pay

back heavy loans are struggling," he added.

Confidence in China's steel sector, by far the world's

largest, has been weak this year, with many enterprises

operating in the red as a result of plummeting prices. The

priority for many smaller firms has been to survive as long as

possible in the hope that their rivals would go bankrupt first.

The China Iron and Steel Association noted some signs of

improvement in its third-quarter report, with profits at member

companies rising 71 percent from the same period last year. But

a quarter of its members were still making losses, it said.

There were also mixed signals from the latest round of

earnings reports.

Major state-owned producers like Hebei Iron and Steel

and Angang Steel (HKSE: 0347-OL.HK - news) reported better profits

in the third quarter but smaller firms tended to fare worse,

with Lingyuan Iron and Steel and SGIS Songshan

both posting net losses.

Rebar and iron ore prices at 0704 GMT

Contract Last Change Pct Change

SHFE REBAR MAY5 2590 +27.00 +1.05

DALIAN IRON ORE DCE DCIO MAY5 536 +12.00 +2.29

SGX IRON ORE FUTURES DEC 79.17 +0.25 +0.32

THE STEEL INDEX 62 PCT INDEX 78.6 -0.20 -0.25

METAL BULLETIN INDEX 79.09 -0.13 -0.16

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

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

(1 US dollar = 6.1142 Chinese yuan)

(Editing by Alan Raybould)