* Dalian iron ore down almost 3 pct; bourse to curb volatility
* Singapore iron ore erases early gains in volatile trade
* Could cut weekly gain in spot iron ore (Recasts, updates prices)
By Manolo Serapio Jr
MANILA, March 11 (Reuters) - Iron ore futures in China fell almost 3 percent on Friday, and those in Singapore surrendered initial gains to trade lower as Shanghai steel prices tumbled after an early-week upsurge, which many thought was too sharp to sustain.
The losses in Dalian iron ore also came after the exchange moved to curb high volatility, which helped fuel Monday's record 19.5 percent spike in spot iron ore prices.
Sharp rises in Chinese steel prices triggered the rally in iron ore although many analysts doubt the longevity of the gains, citing the continuing risks of a slowing Chinese economy on steel demand which shrank for a second year in a row in 2015.
"We view the current strength in iron ore prices as short-lived given fundamentals remain weak," Australia and New Zealand Banking Group analysts wrote in a report.
"However, a broad improvement in sentiment, backed by recent policy measures in China, could be enough to limit the downside and keep prices above recent lows."
The most-traded May iron ore on the Singapore Exchange SZZFK6 was down 1.5 percent at $50.40 a tonne by 0712 GMT, after rising as much as 3.4 percent intraday.
On the Dalian Commodity Exchange, May iron ore DCIOcv1 slid 2.6 percent to close at 427 yuan ($66) a tonne after the exchange moved to rein in volatility in trading.
Starting March 14, the bourse will remove a 50 percent discount on trading fees for one transaction type and will strengthen monitoring, an exchange spokesperson said on Thursday. most-traded May iron ore contract on Dalian surged by its exchange-set limit on Monday and Tuesday, fuelling the rally in Singapore futures and the spot benchmark.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI dropped a further 3.7 percent to $57.40 a tonne on Thursday, after Monday's jump, according to The Steel Index (TSI).
The spot iron ore market has been quiet for the past two days "as buyers waited for a discernible price trend", TSI stated.
"I feel like prices will soften further after rising so fast. Steel traders bought a lot of steel inventory over the last one month," said a Singapore-based iron ore trader.
On the Shanghai Futures Exchange, construction-used rebar dropped 2.9 percent to end at 2,085 yuan a tonne.
Rebar and iron ore prices at 0712 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
2085
-62.00
-2.89 DALIAN IRON ORE DCE DCIO MAY6
427
-11.50
-2.62 SGX IRON ORE FUTURES MAY
50.4
-0.75
-1.47 THE STEEL INDEX 62 PCT INDEX
57.4
-2.20
-3.69 METAL BULLETIN INDEX
57.92
-0.10
-0.17
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day
($1 = 6.4947 Chinese yuan renminbi)