* Spot iron ore down more than 3 pct in January
* Shanghai rebar pulls further away from 4-month top
* Vale scraps dividend on falling iron ore prices
By Manolo Serapio Jr
MANILA, Jan 29 (Reuters) - Spot iron ore is set to end January lower, pressured by a global glut as Chinese steel prices pulled further away from four-month highs amid weak demand.
Shanghai rebar steel futures dropped another 1.7 percent on Friday, helping stretch losses in iron ore futures in Dalian.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI gained 0.5 percent to $41.50 a tonne on Thursday, according to The Steel Index.
But the spot benchmark has fallen more than 3 percent so far this month.
Additional iron ore supply from Australia's Roy Hill mine and Vale's VALE5.SA S11D project in Brazil "will worsen the oversupplied situation amid China's steel production slowdown", said Helen Lau, analyst at Argonaut Securities in Hong Kong.
China's crude steel output dropped 2.3 percent to 803.8 million tonnes in 2015, the first yearly fall since 1981, as producers responded to shrinking demand.
The world's No. 2 economy grew at its slowest pace in a quarter of a century in 2015.
The most-traded May rebar on the Shanghai Futures Exchange SRBcv1 was down 1.7 percent at 1,810 yuan ($275.26) a tonne by midday.
The construction steel product touched a four-month peak of 1,871 yuan on Wednesday as supply tightened amid mill shutdowns although traders say weak demand caused the rally to fizzle.
On the Dalian Commodity Exchange, May iron ore DCIOcv1 fell 1.1 percent to 319 yuan a tonne, falling for a second session.
Amid sliding iron ore prices, top miner Vale is not planning to pay any dividend to shareholders this year while Australian producer Fortescue Metals Group FMG.AX is stepping up cost cuts to stay profitable. believe the ability of producers to cut the cash cost suggests prices for iron ore are structurally lower rather than experiencing a cyclical downturn," ANZ Bank said in a note.
Rebar and iron ore prices at 0425 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
1810
-31.00
-1.68 DALIAN IRON ORE DCE DCIO MAY6
319
-3.50
-1.09 SGX IRON ORE FUTURES FEB
41.16
+0.28
+0.68 THE STEEL INDEX 62 PCT INDEX
41.5
+0.20
+0.48 METAL BULLETIN INDEX
41.92
-0.51
-1.20
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.5756 Chinese yuan)