* Supply glut pressures iron ore prices
* BHP sees no recovery in price for the raw material
* Steel prices drop on weak demand
SHANGHAI, Jan 20 (Reuters) - Chinese iron ore futures dropped on Wednesday after three days of gains, with worries about oversupply of the raw material offsetting expectations that steel mills could pick up production.
The most-traded iron ore futures, for May, on the Dalian Commodity Exchange DCIOcv1 had fallen 0.94 percent to 316.5 yuan ($48.12) a tonne by 0315 GMT. They surged to a nearly two-week high in the previous session.
"Steel mills' profitability has improved so it is likely steel production could pick up, but this is temporary and won't change the overall iron ore oversupply condition, so prices are volatile in the short-term," said Wang Yilin, an analyst with Sinosteel Futures in Beijing.
Iron ore prices tumbled to 282.5 yuan a tonne on Dec.10, the lowest for a most-active contract since the bourse launched iron ore futures in October 2013. The steep decline in the raw material has eased steel mill losses.
BHP Billiton (L:BLT) BHP.AX BHP.L sees no recovery in iron ore prices in the next few years, reinforcing bearish views on the sector which has been slammed by oversupply at a time of slowing growth in China, the biggest metals consumer. top global miner trimmed the full-year forecast for its iron ore output by 10 million tonnes to 237 million tonnes.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI rose for a fourth day to a two-week high, edging up 0.5 percent to $42.10 a tonne on Tuesday, according to The Steel Index.
Shanghai rebar futures also surrendered gains on Wednesday, with the benchmark May contract SRBcv1 down 0.5 percent at 1,818 yuan a tonne, as demand remains stagnant after construction activity slowed in northern regions. Rebar and iron ore prices at 0315 GMT
Contract
Last
Change Pct Change
SHFE REBAR MAY6
1818
-9.00
-0.49
DALIAN IRON ORE DCE DCIO MAY6
316.5
-3.00
-0.94
SGX IRON ORE FUTURES FEB
40.5
-0.58
-1.41
THE STEEL INDEX 62 PCT INDEX
42.1
+0.20
+0.48
METAL BULLETIN INDEX
42.78
+0.12
+0.28
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.5777 Chinese yuan renminbi)