* Spot steel recovers slightly, but outlook gloomy
* Rising steel output, waning steel demand to weigh on prices
SHANGHAI, May 18 (Reuters) - Chinese iron ore and steel futures slipped on Wednesday, giving up gains seen earlier in the session as worries about a persistent supply glut dragged on prices.
Both commodities posted gains in the past two sessions, steadying after a sharp drop last week, but industry experts had said this only indicated a less-bearish market sentiment. They cautioned that weak supply-demand fundamentals would reassert themselves, dragging down prices once more.
"The market is expected be driven more by fundamentals after big volatilities ... supply is rising while demand growth is slowing. The oversupply situation will not be changed in a short term," the China Iron & Steel Association said on Wednesday.
The most active iron ore contract on the Dalian Commodity Exchange DCIOcv1 was down 1.5 percent at 369 yuan ($56.49). It hit a one-week high of 392 yuan earlier in the day.
Rebar futures on the Shanghai Futures Exchange SRBcv1 rose almost 3 percent earlier in the day, but gave up gains later to trade down 1.7 percent at 2,041 yuan a tonne.
Steel suffered its biggest seven-day drop on record in the week to May 13, while iron ore logged its worst loss in almost a year, dragged by a persistent oversupply and strong measures by Chinese exchanges to stamp out speculative activity. market is becoming relatively stable after big swings, and the sentiment is less bearish after spot steel prices recovered slightly," said Kevin Bai, a CRU analyst in Beijing.
Spot prices of billet, a semi-finished steel product widely used as a market reference, rose 70 yuan to 2,060 yuan a tonne in a top steelmaking city of Tangshan, traders said.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI rose 3.5 percent to $55.7 a tonne on Tuesday, according to price assessor The Steel Index.
Other steelmaking raw materials fell on Wednesday, with coke DCJcv1 slipping 0.6 and coking coal DJMcv1 down 1 percent.
($1 = 6.5327 Chinese yuan renminbi)