By A. Ananthalakshmi
SINGAPORE, Dec 25 (Reuters) - Iron ore fell on Friday but was poised for a second straight weekly gain after finding support from signs of near-term supply tightness in top consumer China, but the long-term fundamentals remained weakened by a global glut and shrinking Chinese demand.
Shanghai steel futures were on track for a third straight weekly gain, their longest winning streak on a weekly basis in a year.
"In the last two weeks, iron ore futures found some support from the improvement in the rebar futures. But during this whole period, there is actually no improvement in underlying demand," said Wang Di, an analyst with CRU in Beijing.
"I don't think the price increase will be sustainable because there is no support from demand," Wang said, adding that there will be no significant restocking in China ahead of the lunar new year holiday in February.
The most-active May iron ore contract on the Dalian Commodity Exchange DCIOcv1 had eased 0.3 percent to 304.5 yuan ($47.05) a tonne as of 0309 GMT. It was headed for a 2.5 percent weekly gain.
The most-traded May rebar contract on the Shanghai Futures Exchange SRBcv1 rose 0.2 percent to 1,730 yuan ($267.33) a tonne and is up 2 percent for the week, after hitting a five-week high of 1,764 yuan earlier in the week. The last time steel futures gained for three straight weeks was in November-December 2014.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI was priced at $40.20 a tonne on Thursday, unchanged from the previous two sessions, according to The Steel Index.
The spot benchmark has recovered nearly 9 percent since tumbling to $37 on Dec. 11, its lowest since at least 2008. But for the year, it was still down 44 percent.
Iron ore could fall below $30 a tonne in the next few months, forcing more high-cost suppliers out of business, a Reuters poll showed last week. urn:newsml:reuters.com:*:nL3N14736J
Some of the year-end price reprieve has come from tighter supplies at top consumer China as steel mills cut output on weak demand. The approach of the lunar new year holiday will also prompt some companies to lower production.
That, however, would still not be enough to offset the price pressure from excess global supplies of iron ore while demand is in a slump.
China's steel demand continued to shrink this year after falling in 2014 for the first time in more than three decades. More than 50 million tonnes of steel capacity have shut in China this year, according to CRU.
Rebar and iron ore prices at 0309 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
1730
+3.00
+0.17 DALIAN IRON ORE DCE DCIO MAY6
304.5
-1.00
-0.33 THE STEEL INDEX 62 PCT INDEX
40.2
+0.00
+0.00 METAL BULLETIN INDEX
41
+0.18
+0.44
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.4713 Chinese yuan renminbi)