* Dalian futures up 1.6 pct, but heading for weekly loss
* Steel traders cutting inventories ahead of holiday
BEIJING, Sept 25 (Reuters) - Chinese iron ore futures rebounded on Friday, but were still heading for another weekly loss as underlying demand remained sluggish and steel traders sought to cut their inventories ahead of the week-long National Holiday beginning on Oct. 1.
Iron ore for January delivery on the Dalian Commodity Exchange DCIOcv1 rose 1.6 percent to 383.5 yuan ($60.14) a tonne at the midday break on Friday. But prices were down 3.6 percent for the week.
By comparison, the China Iron and Steel Association's price for 62 percent iron ore delivered into China reached $56.19 a tonne on Thursday, up 1.1 percent compared to Wednesday.
The Steel Index's iron ore price for immediate delivery into China .IO62-CNI=SI stood at $56.8 per tonne on Thursday, unchanged due to a holiday.
Traders warn that iron ore deliveries are set to increase further in coming weeks, a bad sign for prices in the absence of any significant upturn in Chinese steel demand.
"Iron ore shipments to China are rising, reflected by the growing port inventories, and that will put downward pressure on spot prices," said an iron ore trader in Shanghai.
Analysts said steel traders have been working to reduce their stocks ahead of National Day, but they see little reason for optimism once activities resume a week later, even though steel consumption normally improves during the month.
"Traders are mostly getting rid of their products and maintaining low-inventory operations, and the September Caixin PMI reaching a new low of 47 suggests the economic slowdown is unlikely to turn around and that downstream demand will remain weak," said an analyst with trading portal PRCSteel.
January rebar on the Shanghai Futures Exchange SRBcv1 ended the Friday morning session at 1,897 yuan per tonne, up 0.1 percent from Thursday's close.
Rebar and iron ore prices at 0334 GMT
Contract
Last
Change Pct Change SHFE REBAR JAN6
1897
+2.00
+0.11 DALIAN IRON ORE DCE DCIO JAN6
383.5
+6.00
+1.59 THE STEEL INDEX 62 PCT INDEX
56.8
-0.30
-0.53 METAL BULLETIN INDEX
55.3
-0.91
-1.62
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.3766 Chinese yuan)