* Singapore iron ore futures fall, Dalian well off highs
* Spot benchmark soared 7 pct on Monday, up 17 pct this year
By Manolo Serapio Jr
MANILA, Feb 23 (Reuters) - Iron ore futures in Singapore retreated and those in China came off session highs on Tuesday after recent rapid gains, with Chinese steel prices pulling back from 5-1/2-month peaks.
Weaker ferrous futures could stall further gains in spot iron ore that on Monday surged 7 percent to above $50 a tonne, a level last seen in October.
Thanks to a recovery in Chinese steel prices and efforts by Beijing to boost its property market, iron ore is in its biggest rally since 2012, outpacing gold to be the best performing commodity so far this year. after big gains that began after the Chinese returned from the Lunar New Year holiday, prices retreated. The most-traded May iron ore on Singapore Exchange SZZFK6 was down 4 percent at $44.60 a tonne by 0408 GMT.
On the Dalian Commodity Exchange, May iron ore DCIOcv1 was up 1.2 percent at 366 yuan ($56) a tonne, but well off a session high of 379 yuan, its strongest since Sept. 11.
Rebar on the Shanghai Futures Exchange SRBcv1 dropped 0.6 percent to 1,923 yuan a tonne, after hitting 1,968 yuan on Monday, also its loftiest since Sept. 11.
"While iron ore prices have increased more than we expected, we still believe the rally reflects restocking demand post the Lunar New Year and as steel mills ready themselves for the construction season, which typically begins in March," Commonwealth Bank of Australia (CBA) said in a note.
"We expect prices to drift lower to $40/tonne in the next month as optimism for steel demand in China fades."
As prices recover, small miners that have been shut out of the market by the slump, could resume and CBA said Chinese iron ore production starts looking more attractive with prices at $55-$60, "further suggesting to us that the rally is likely unsustainable".
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI jumped 7 percent to $50.30 a tonne on Monday, according to The Steel Index. It was the biggest single-day gain for the spot benchmark since July last year.
Spot iron ore has risen more than 17 percent so far in 2016, after losing around 70 percent in the past two years.
Helping boost optimism was China's move on Friday to cut transaction taxes for second-time home buyers and some first home buyers in many cities, its latest effort to lift the housing market and a slowing economy. have been a series of measures to encourage property purchases. In early February, minimum downpayments for first- and second-time home buyers were reduced. and iron ore prices at 0408 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY
1923
-11.00
-0.57 DALIAN IRON ORE DCE DCIO MAY
366
+4.50
+1.24 SGX IRON ORE FUTURES MAY
44.6
-1.85
-3.98 THE STEEL INDEX 62 PCT INDEX
50.3
+3.30
+7.02 METAL BULLETIN INDEX
51.52
+3.00
+6.18
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.5282 Chinese yuan)