* Spot iron ore up almost 6 percent at highest since Nov
* Dalian iron ore near four-month high
* Iron ore stockpiles at China ports at most since May
By Manolo Serapio Jr
MANILA, Feb 16 (Reuters) - Iron ore futures in China edged up on Tuesday, promising more gains for spot prices that are at their strongest level since November as buyers snap up physical cargoes on optimism over a revival of demand.
There is talk that some mills in China's major steel producing Tangshan city are looking to resume production in anticipation of demand picking up after last week's Chinese New Year holiday, said a Shanghai-based iron ore trader. He, however, cautioned the bullish outlook may be short-lived.
"I really doubt we'll see strong demand for steel products," said the trader, citing a slower economy. Data on Monday showed China's exports and imports dropped much faster than expected in January. most-traded May iron ore on the Dalian Commodity Exchange DCIOcv1 was up 0.6 percent at 339 yuan ($52) a tonne by midday, after peaking at 341.50 yuan. It touched 342 yuan on Monday, its strongest since Oct. 20.
That bodes well for the spot benchmark that rallied 5.6 percent to $45.60 a tonne .IO62-CNI=SI on Monday, the highest since Nov. 18, based on data compiled by The Steel Index.
Monday's jump was the biggest since July last year.
"Based on current steel prices, I don't think it's a good idea for mills to buy iron ore at current levels. It will be difficult for them to make any money," said the Shanghai trader.
May rebar on the Shanghai Futures Exchange SRBcv1 was last up 0.4 percent at 1,867 yuan a tonne, after matching Monday's 4-1/2-month top of 1,880 yuan.
Commonwealth Bank of Australia expects China's crude steel output to fall again this year due to weak domestic consumption, "with steel exports unlikely to provide any real offset as countries put up trade barriers on steel".
"Under this view, we could see a glut of steel in China push down domestic steel prices, likely translating through to weaker iron ore prices due to margin pressure," the bank said in a note.
China's steel exports dropped to 9.74 million tonnes in January from 10.66 million tonnes in December.
Stocks of iron ore at China's major ports stood at 95.5 million tonnes as of Feb. 14, the highest since May last year, according to industry consultancy SteelHome. SH-TOT-IRONINV
Rebar and iron ore prices at 0426 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY
1867
+7.00
+0.38 DALIAN IRON ORE DCE DCIO MAY
339
+2.00
+0.59 SGX IRON ORE FUTURES MAY
41.64
-0.12
-0.29 THE STEEL INDEX 62 PCT INDEX
45.6
+2.40
+5.56 METAL BULLETIN INDEX
46.26
+2.61
+5.98
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.5136 Chinese yuan)