* Shanghai rebar up 19 pct in Q1, Dalian iron ore gains 10 pct
* Spot iron ore up 3.7 pct in Q1 vs 41 pct surge in Q4
* China's steel restocking cycle nearly over - CBA
By Manolo Serapio Jr
MANILA, March 31 (Reuters) - Chinese iron ore futures fell nearly 2 percent on Friday and were headed for a monthly drop as steel prices cut gains amid worries that the steel restocking period in the world's top consumer may be nearly done and surplus risks are rising.
The weakness in iron ore futures has pulled down spot prices by nearly 14 percent from this year's peak. Spot prices are also under pressure by surging stockpiles of the raw material at China's ports that are now the biggest in at least 13 years.
The most-active rebar on the Shanghai Futures Exchange SRBcv1 was up 0.5 percent at 3,170 yuan ($460) a tonne by 0316 GMT, after peaking at 3,224 yuan earlier.
The construction steel product has risen 19 percent in the first quarter, thanks to a rally driven by hopes of stronger Chinese infrastructure spending and Beijing's campaign to reduce excess production capacity.
But Commonwealth Bank of Australia analyst Vivek Dhar said the bank continues to believe that "markets are pricing in overly optimistic projections on Chinese steel consumption this year."
"China's steel restocking cycle is nearly over so oversupply risks are increasing," Dhar said in a note.
China's steel demand is expected to fall 1.9 percent this year to 660 million tonnes, pressuring iron ore prices, Li Xinchuang, vice chairman of the China Iron and Steel Association, said on Thursday. ore for September delivery on the Dalian Commodity Exchange DCIOU7 slipped 1.6 percent to 559 yuan per tonne. The September contract has gained 10 percent in the January to March period, backed by the earlier rally in steel, but has fallen 13 percent so far in March.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB dropped 0.6 percent to $81.78 a tonne on Thursday, according to Metal Bulletin. The spot benchmark has risen 3.7 percent in the first quarter, a fraction of its 41 percent increase in October-December.
Supply from higher cost producers including in China has risen this year and Commonwealth Bank's Dhar expects iron ore to fall from current levels over the next six months and average $60 during the quarter ending in December.
($1 = 6.8979 Chinese yuan)