* China buying, interruption at Samarco mine lift prices
* Mills to cut output further, large-scale closure unlikely
SHANGHAI, Nov 10 (Reuters) - Chinese iron ore futures extended gains on Tuesday, lifted by a modest pick-up in buying from steel mills in the world's top consumer and a deadly collapse at an iron ore mine owned by two of the world's biggest producers.
Spot prices of the steelmaking ingredient inched up after some steel mills have slowed their production cutback due to the weak recovery in steel prices.
A massive mudflow and flood at the Samarco mine jointly owned by BHP Billiton (L:BLT) BHP.AX BHP.L and Vale VALE5.SA has interrupted iron ore shipment, forcing BHP to review its fiscal 2016 production guidance and Vale to cut output from two nearby mines. urn:newsml:reuters.com:*:nL1N13506L urn:newsml:reuters.com:*:nL3N1330W7
Chinese steel mills were earlier expected to make deep production cuts due to hefty losses, slumping prices and cash shortage, a move that would reduce appetite for the raw material and drove iron ore prices to their lowest in four months.
However, analysts expected that large-scale production cutbacks and shutdown would be in checks as the latest slump in iron ore prices have helped ease pressure for steel mills.
"The recent weak gains in steel prices have promoted some mills to slow the pace of cutting output and this has underpinned iron ore prices," said Yu Yang, an analyst with Shenyin & Wanguo Futures in Shanghai.
Yu expected iron ore prices to fluctuate with limited upside and downside risks over next few weeks.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI advanced 0.6 percent to $47.70 a tonne on Monday, according to the Steel Index. It was the first gain in six sessions, but still hovered near the lowest since July 8.
Iron ore for January delivery on the Dalian Commodity Exchange DCIOcv1 rose 0.3 percent to 348 yuan($54.73) a tonne by midday.
The most-traded May rebar on the Shanghai Futures Exchange SRBcv1 was flat at 1,799 yuan a tonne. It tumbled to a record low of 1,768 yuan last week.
Rebar and iron ore prices at 0358 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
1799
+0.00
+0.00 DALIAN IRON ORE DCE DCIO JAN6
348
+1.00
+0.29 THE STEEL INDEX 62 PCT INDEX
47.7
+0.30
+0.63 METAL BULLETIN INDEX
48.24
+0.03
+0.06
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.3587 Chinese yuan renminbi)