* China seasonal steel demand seen picking up, but not sharply
* Spot iron ore recovers some lost ground after 7-pct slide Tues (Adds globalORE trade, updates prices)
By Manolo Serapio Jr
MANILA, March 17 (Reuters) - Iron ore and steel futures in China climbed more than 4 percent on Thursday, tracking firmer equities and other commodities as risk-appetite increased after the U.S. Federal Reserve signaled fewer interest rate increases this year amid global headwinds.
The gains, also seen in Singapore iron ore futures, may be tough to sustain as seasonal steel demand in China remained slow.
Chinese steel demand could pick up steam by end-March or early April with construction activity thickening as the weather gets warmer, said Richard Lu, analyst at consultancy CRU in Beijing.
"But we do not think the support from seasonal demand will be strong enough to lift prices sharply," said Lu. He said spot prices of construction steel products in China, including rebar, continued to drop after last week's rally that was fueled by speculative buying.
Rebar in Shanghai was sold around 2,200 yuan ($339) a tonne on Wednesday, down by around 170 yuan from last week, said Lu.
On the Shanghai Futures Exchange, October rebar SRBcv1 closed 4.3 percent higher at 2,078 yuan ($320) a tonne, but off an eight-month high of 2,138 yuan reached on March 10.
Stockpiles of rebar held by Chinese traders dropped nearly 300,000 tonnes to 6 million tonnes as of March 11 from the prior week, said Lu, suggesting only a modest pickup in demand so far.
The most-traded May iron ore on the Dalian Commodity Exchange DCIOcv1 climbed 4.8 percent to finish at 435.50 yuan a tonne.
The gains in ferrous futures followed firmer risky assets elsewhere after the Fed held interest rates steady on Wednesday, with fresh projections showing policymakers expected two quarter-point hikes by the year's end, half the number seen in December. MKTS/GLOB
On the Singapore Exchange, May iron ore SZZFK6 advanced 3.7 percent to $51.85 a tonne.
"These days of volatility on iron ore derivatives will continue, but on the physical side the downward trend will continue as well," said a Shanghai-based trader.
Benchmark 62-percent grade iron ore for delivery to China's Tianjin port .IO62-CNI=SI rose 1.6 percent to $52.50 a tonne on Wednesday, after tumbling nearly 7 percent the previous day, according to The Steel Index.
Tuesday marked a fifth day of decline for the spot benchmark, a run that saw it lose 18.3 percent. But that came shortly after it soared by a record 19.5 percent on March 7.
A 100,000-tonne cargo of 62-percent grade Australian Pilbara iron ore fines for April delivery to China was sold at $55 a tonne on globalORE on Thursday, according to the physical trading platform's website.
Rebar and iron ore prices at 0720 GMT
Contract
Last
Change Pct Change SHFE REBAR OCT6
2078
+85.00
+4.26 DALIAN IRON ORE DCE DCIO MAY6
435.5
+20.00
+4.81 SGX IRON ORE FUTURES MAY
51.85
+1.85
+3.70 THE STEEL INDEX 62 PCT INDEX
52.5
+0.80
+1.55 METAL BULLETIN INDEX
53.57
+0.69
+1.30
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.4962 Chinese yuan)