* Dalian iron ore jumps as much as 4 pct
* Shanghai rebar up nearly 1 pct
* Increase in physical activity boosts iron ore - analyst (Updates prices)
By A. Ananthalakshmi
SINGAPORE, Dec 30 (Reuters) - Iron ore futures jumped as much as 4 percent on Wednesday, while the overnight spot price rose to a four-week high, boosted by an uptick in rebar futures and an increase in physical buying activity.
The most-active May iron ore contract on the Dalian Commodity Exchange DCIOcv1 rose to a session high of 324.50 yuan ($50.01) a tonne, before paring some gains to close up 2.9 percent at 321 yuan.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI was priced at $41.40 a tonne on Tuesday, up 2.2 percent from the previous session, according to The Steel Index. Tuesday's price was the highest since Dec. 1.
"Iron ore futures have followed the uptrend in rebar prices. There is also an improvement of buying activity in the spot market," said Wang Di, an analyst with CRU in Beijing.
"Traditionally, seaborne supply decreases in January to early February. Domestic buyers are purchasing now for future needs fearing less supply," Wang said.
The price rally, however, will only be temporary as steel mills in China continue to suspend or lower production, she said.
As factories cut output, demand for raw material iron ore drops.
Global oversupply and shrinking Chinese steel demand have pummeled iron ore prices, with the spot rate of the steel-making commodity down 42 percent this year. China's steel demand has continued to decline this year after falling in 2014 for the first time in more than three decades.
Iron ore could fall below $30 a tonne in the next few months, forcing more high-cost suppliers out of business, a Reuters poll showed earlier this month. urn:newsml:reuters.com:*:nT9N0NH05H
For now, it is getting some support from a year-end rally in steel prices.
The most-traded May rebar contract on the Shanghai Futures Exchange SRBcv1 rose 0.9 percent to 1,780 yuan ($274.32) a tonne.
Rebar has gained in recent days on expectations of a near-term supply squeeze as mills cut production. Stockpiles are also at historically low levels.
Stocks of rebar, a steel product used in construction, stood at 3.636 million tonnes at 28 major cities in China on Dec. 25, according to industry consultancy SteelHome. That is the lowest since the data became available in 2011.
The recent price rally may be short-lived as underlying demand for steel in China remains weak, analysts have said.
Rebar and iron ore prices at 0701 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
1780
+15.00
+0.85 DALIAN IRON ORE DCE DCIO MAY6
321
+9.00
+2.88 SGX IRON ORE FUTURES JAN
42.01
+0.09
+0.21 THE STEEL INDEX 62 PCT INDEX
41.4
+0.90
+2.22 METAL BULLETIN INDEX
42.31
+0.00
+0.00
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day
($1 = 6.4888 Chinese yuan)