SHANGHAI, March 28 (Reuters) - Chinese steel futures extended gains on Monday, backed by improved seasonal demand and low inventories in top market China, lifting prices for raw material iron ore.
The most-traded rebar futures contract for October settlement on the Shanghai Futures Exchange SRBcv1 jumped 2 percent to 2,186 yuan ($335.54) a tonne by 0233 GMT.
Chinese steel demand is expected to improve seasonally while steel mills are resuming production at a slower-than-expected pace, underpinning gains in spot prices.
"The pace of mills' production recovery has been slow, and inventories owned by steel mills and end users are at a low level, so we are likely to see more (price) gains in April," said Wang Yilin, an analyst with Sinosteel Futures in Beijing.
Spot prices of rebar, a steel product primarily used in construction, rose up to 50 yuan a tonne to 2,350 yuan a tonne in Shanghai and jumped as well in other markets including Beijing on Monday, traders said.
The extended gains in steel prices have boosted the iron ore market, with investors expecting steel mills to need more of the key steelmaking ingredient as they accelerate production amid improving profit.
China's industrial profits returned to growth in the first two months of 2016, with combined profits rising 4.8 percent from a year ago, despite weakening business conditions and slowing economic growth. ore futures for the September contract on the Dalian Commodity Exchange DCIOcv1 rose 1.9 percent to 397 yuan a tonne.
Spot iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI slumped 3.1 percent to $55.50 a tonne on Thursday, according to The Steel Index. The price was not published on Friday. ($1 = 6.5148 Chinese yuan)