* Iron ore rebounds after two consecutive weekly losses
* Supply disruption and hope of pickup in demand drive gains
* Steel prices jump 3 pct (Updates close prices)
SHANGHAI, Jan 18 (Reuters) - Chinese iron ore futures surged 4 percent to their highest in more than a week on Monday, buoyed by expectations that demand in the world's top consumer could pick up in the first quarter and as the rainy season curbs supply from South America.
The most traded iron ore futures for May on the Dalian Commodity Exchange DCIOcv1 climbed more than 4 percent to a session peak of 321.5 yuan ($48.87) a tonne, the highest since Jan. 7.
The contract was up 3.6 percent at 319 yuan a tonne at close on Monday, after posting two consecutive weekly losses. first-quarter market outlook is not as pessimistic as before. Steel inventories are low and mills' profitability is improving, while shipment of iron ore from Brazil is dropping because of rains," said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen.
"However, the gains are not solid yet and prices are likely to fall again before the Chinese New Year holiday."
The Lunar New Year will fall in early February.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI gained 1.5 percent to $40.20 a tonne on Friday, according to The Steel Index (TSI).
The most active rebar contract on the Shanghai Futures Exchange SRBcv1 had surged 3 percent to close at 1,827 yuan a tonne, after touching a session high of 1,832 yuan a tonne, its highest since Jan.4.
Rebar and iron ore prices at 0705 GMT
Contract
Last
Change Pct Change
SHFE REBAR MAY6
1827
+53.00
+2.99
DALIAN IRON ORE DCE DCIO MAY6
319
+11.00
+3.57
SGX IRON ORE FUTURES FEB
41.32
+2.16
+5.52
THE STEEL INDEX 62 PCT INDEX
40.2
+0.60
+1.52
METAL BULLETIN INDEX
41.12
+0.90
+2.24
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.5790 Chinese yuan)