* Tighter credit forcing mills to cut ore inventory - CBA
* Modest gains in Dalian iron ore (Updates prices)
By Manolo Serapio Jr
MANILA, Nov 23 (Reuters) - Shanghai steel futures fell more than 3 percent to an all-time low on Monday amid poor demand and tighter credit, which is forcing many producers to reduce their inventory of raw material iron ore.
Low profitability has cut the utilisation rate among Chinese steel mills and that will "worsen oversupply of iron ore," said Helen Lau, analyst at Argonaut Securities in Hong Kong.
In Tangshan in China's top steel producing Hebei province, utilisation rate stood at 81 percent, the lowest since 2009, she said.
Rebar for May delivery on the Shanghai Futures Exchange SRBcv1 fell as far as 1,649 yuan ($258) a tonne, the lowest for a most-active contract since the bourse launched rebar futures in 2009. It closed down 2.5 percent at 1,659 yuan.
Stocks of iron ore at China's ports stood at 86.1 million tonnes on Friday, down 450,000 tonnes from the previous week when it reached its highest since May, according to data tracked by industry consultancy SteelHome. SH-TOT-IRONINV
Commonwealth Bank of Australia analyst Vivek Dhar said "tighter credit is also forcing many steel mills to adjust to lower inventory levels."
As China's steel output drops, it could "potentially dampen any significant restocking cycle," Dhar said in a note.
China's steel production dropped 2.2 percent in January-October as consumption shrank nearly 6 percent during the period due to a slowing economy.
Spot iron ore lost more than 5 percent last week, its steepest such decline in five weeks, as the raw material came close to its lowest level since July amid a global glut and faltering Chinese demand.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI slipped 0.2 percent to $45 a tonne, according to The Steel Index (TSI). It was less than a dollar above July's $44.10, the lowest ever since TSI began assessing prices in 2008.
Slower coal and iron ore demand from China have battered the dry bulk shipping sector whose slump is set to extend well into next year. urn:newsml:reuters.com:*:nL8N13F1XJ
Rebar and iron ore prices at 0702 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
1659
-43.00
-2.53 DALIAN IRON ORE DCE DCIO JAN6
335
+1.50
+0.45 SGX IRON ORE FUTURES JAN
41.75
-0.52
-1.23 THE STEEL INDEX 62 PCT INDEX
45
-0.10
-0.22 METAL BULLETIN INDEX
44.91
-0.53
-1.17
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.3876 Chinese yuan)