SHANGHAI, April 6 (Reuters) - Shanghai rebar futures extended gains to a nearly three-month high on Friday, amid a pickup in steel demand as construction activity resumes though the rise could be limited as cooling economic growth in China, the world's top steel producer and consumer, is likely to weigh on the market.
The most active October rebar contract on the Shanghai Futures Exchange climbed to its highest since Jan. 17 before easing 2 yuan to close at 4,385 yuan ($690) a tonne, up 0.7 percent from the previous close. The contract hit a one-month low on Thursday.
"Buying from end users is rising gradually, but both traders and users continue to face tightness in credit, limiting their bookings," said a steel trader based in Shanghai.
"I am still concerned over overall market demand this year due to a slowdown in China's economy. Many traders, who have annual buying contracts with steel mills, have cut their contract volumes this year due to tightness in credit and a shaky outlook on demand."
The Chinese iron ore market has been slow after the long holiday weekend, even though traders are keen to tap marginal gains in steel prices. Upbeat services sector data lent some strength to steel, a raw material widely used in construction, manufacturing and auto making.
China's fast-growing services sector expanded again in March as business confidence hit an 11-month high, according to the HSBC Services Purchasing Managers Index (PMI).
"The market has moved little after the holiday. Some traders want to raise prices, but demand isn't strong enough to support their keenness," said an iron ore trader in Shanghai.
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI held steady again at $147.60 a tonne on Thursday, according to The Steel Index, near the five-month high of $147.70 reached last week.