* Iron ore has fallen 7 pct from 3-1/2-mth high in mid-Aug
* Shanghai steel has lost almost 11 pct during same period
By Manolo Serapio Jr
MANILA, Sept 9 (Reuters) - Spot iron ore prices were headed for a third weekly fall after sliding towards $57 a tonne to the lowest since July amid expectations of rising supply.
Efforts to stimulate the economy in China, the world's top iron ore consumer, sparked a rally this year, pushing spot iron ore up by around a third, but those measures are expected to fade in late 2016 or early 2017 as Beijing renews its focus on transitioning the economy towards consumption and services, said Vivek Dhar, analyst at Commonwealth Bank of Australia.
"With low cost iron ore supply increasing and Chinese steel output and iron ore demand to falter in the next year, we expect iron ore prices to decline by year-end," Dhar said in a note.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI fell 1.5 percent to $57.40 a tonne on Thursday, a level last seen on July 26, according to data compiled by The Steel Index.
The spot benchmark has tumbled 7 percent from a 3-1/2-month high of $61.80 reached on Aug. 16, tracking losses in Chinese steel prices during the period. It has dropped nearly 3 percent so far this week.
There was little appetite for physical iron ore cargoes this week amid softer steel prices.
The most-traded rebar, a construction steel product, on the Shanghai Futures Exchange SRBcv1 has fallen nearly 13 percent from a peak hit on Aug. 16 to trade at 2,316 yuan ($347) a tonne by 0241 GMT on Thursday.
Also weighing on steel prices this week is the resumption of production among Chinese mills shut ahead of last weekend's G20 summit in a bid to control pollution, traders said.
While seasonal buying may lend some support to steel, any restocking by traders is unlikely to be aggressive, said Richard Lu, a Beijing-based analyst with CRU consultancy.
"We may see a further price correction if production will remain high through October," he said.
On the Dalian Commodity Exchange, the most-active January iron ore DCIOcv1 slipped 0.3 percent to 405.50 yuan a tonne.
($1 = 6.6732 Chinese yuan)