* Dalian futures rose as much as 3.4 pct
* Mills looking to replenish ore stockpiles after holiday-trader
* Weak Chinese steel prices may cut short iron ore rally (Updates prices)
By Manolo Serapio Jr
MANILA, Oct 8 (Reuters) - Iron ore futures in China climbed nearly 2 percent on Thursday with steel mills looking to replenish inventories of the raw material after a week-long National Day break.
However, gains could be short-lived, traders and analysts warned, as a weak steel market forces producers to curb production, cutting demand for iron ore.
The most-traded iron ore for January delivery on the Dalian Commodity Exchange DCIOcv1 closed up 1.9 percent at 373.50 yuan ($59) a tonne, after rising as high as 379 yuan.
Other China-traded commodities such as copper SCFcv1 and nickel SNIF6 also spiked along with equities, catching up to a global rally in risk assets. MKTS/GLOB
"Because everybody's back from holidays, there could be some mills who need to replenish their inventory," said an iron ore trader in Shanghai. "So iron ore prices could see some gains this week and next."
But soft Chinese steel prices, dragged down by continuously weak demand in the world's top consumer, could cut short an iron ore rally.
There has been no pickup in steel demand this month, usually a seasonally brisk period, the Shanghai trader said, blaming a slowdown in the overall economy. "I think the trend would continue for the rest of the year," he said.
Construction-used rebar on the Shanghai Futures Exchange SRBcv1 ended unchanged at 1,826 yuan a tonne. The most-active January contract touched a record low of 1,815 yuan on Sept. 30, just before China's Oct. 1-7 holiday.
Spot iron ore prices steadied at around $54 a tonne during the Chinese break amid a lack of physical trading activity. The 62-percent grade ore benchmark .IO62-CNI=SI stood at $54.40 a tonne on Oct. 7, unchanged from Sept. 30, according to The Steel Index.
A slowdown in China's steel production will dampen iron ore demand, while oversupply of the steelmaking commodity will worsen next year, said Helen Lau, analyst at Argonaut Securities in Hong Kong.
"China's iron ore production reduction will not offset the production increase from overseas top producers," said Lau, who sees the price dropping to $50 a tonne next year from an estimated $58 this year.
Rebar and iron ore prices at 0714 GMT
Contract
Last
Change Pct Change SHFE REBAR JAN6
1826
+0.00
+0.00 DALIAN IRON ORE DCE DCIO JAN6
373.5
+7.00
+1.91 SGX IRON ORE FUTURES OCT
52.87
-0.55
-1.03 THE STEEL INDEX 62 PCT INDEX
54.4
+0.40
+0.74 METAL BULLETIN INDEX
53.14
-3.07
-5.46
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.3516 Chinese yuan)