* Dalian iron ore climbs nearly 5 pct to hit upside limit
* Shanghai jumps over 4 pct to highest since September
By Manolo Serapio Jr
MANILA, Feb 22 (Reuters) - Dalian iron ore jumped almost 5 percent to hit its upside limit on Monday as Shanghai steel prices surged to their highest since September, with both commodities extending last week's rally on signs of a pick-up in demand.
Iron ore futures in Singapore also surged, boding well for spot iron prices that rose the most in 10 months last week as they moved closer to $50 a tonne.
"Low steel inventory, seasonal demand rebound after Chinese New Year and increasing utilization rate at blast furnaces have resulted in a rebound in steel and iron ore prices," Argonaut Securities analyst Helen Lau said in a note.
Lau said steel margins among Chinese producers have also improved since they were using the lower-priced iron ore they bought a month ago.
The most-traded May iron ore on the Shanghai Futures Exchange DCIOcv1 rose as much as 4.9 percent to its exchange-set ceiling of 365.50 yuan ($56.06) a tonne, its strongest since Sept. 17. It was up 4.7 percent at 365 yuan by 0237 GMT.
On the Singapore Exchange, March iron ore SZZFH6 rose 3.9 percent to $48 a tonne.
Construction-used rebar for May delivery on the Shanghai Futures Exchange SRBcv1 was up 3 percent at 1,938 yuan a tonne after rising as far as 1,965 yuan, the highest since Sept. 11.
Construction activity typically picks up in China shortly after the Lunar New Year break, and traders anticipate demand for construction steel products to gain further next month.
But excess supply could eventually overwhelm demand, analysts say.
"We believe this rebound in steel prices and iron ore will be short-lived in view of oversupply," said Lau.
For now, spot iron ore could rally further. Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI climbed 1.1 percent to $47 a tonne on Friday, the highest since Nov. 16, based on data compiled by The Steel Index.
The spot benchmark increased nearly 9 percent last week, its biggest such gain since last April.
Rebar and iron ore prices at 0237 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
1938
+57.00
+3.03 DALIAN IRON ORE DCE DCIO MAY6
365
+16.50
+4.73 SGX IRON ORE FUTURES MAR
47.92
+1.74
+3.77 THE STEEL INDEX 62 PCT INDEX
47
+0.50
+1.08 METAL BULLETIN INDEX
48.52
+1.38
+2.93
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.5195 Chinese yuan)