* Mills avoid forward shipments on poor steel demand
* Shanghai rebar gains, tracking other risk assets
By Manolo Serapio Jr
SINGAPORE, July 3 (Reuters) - Benchmark spot iron ore prices hit three-week lows and bids were scarce on Tuesday as mills from top buyer China stayed off the market amid weak steel demand.
Ample supply in the spot market also pressured iron ore prices as miners continued to unload cargoes, at a time when a slowing Chinese economy is hurting demand for steel and prompting mills to curb output.
"Steel demand will continue to weaken as construction activities are curbed amid heavy rains in some regions and high temperatures elsewhere in China," said an iron ore trader in
"So steel mills are trying to avoid making forward shipments while traders believe stockpiling is too risky at the moment."
Iron ore with 62-percent iron content .IO62-CNI=SI, the industry benchmark, slipped 0.4 percent to $133.50 a tonne on Monday, based on data from Steel Index, dropping for a third day running.
That was the lowest level for the main steelmaking raw material since June 12, and some traders see further downside.
"I don't see any reason why it will rebound," said a Singapore-based trader. "It's looking very negative out there. We're clearly seeing a trend of more and more tonnes coming into the spot market and demand is not changing."
Over recent months, Brazil's Vale has been the most aggressive in selling spot cargoes to China.
A Hong Kong trader estimated that the world's top iron ore supplier had sold between 800,000 tonnes and 1 million tonnes of iron ore in the spot market each week last month, outpacing Australian miners such as BHP Billiton which may have sold less than half of that volume in a week.
Rio Tinto is selling 160,000 tonnes of 61.5-percent grade Australian Pilbara iron ore fines at a tender on Tuesday, traders said, and expectations are for prices to fall further.
A cargo of Pilbara iron ore fines was sold via the platform run by the China Beijing International Mining Exchange on Tuesday at around $137 a tonne, said another trader in Singapore, higher than current market offers of $134-$135.
"It doesn't make sense. We're offering Australian cargoes at substantially below that, about $4-$5 below that," the trader said.
"It seems like there are people out there who have an interest in keeping this market up and intentionally pay above market."
Shanghai steel rebar futures rose on Tuesday after two days of losses, although the gains were more in line with other risk assets as bleak global manufacturing data raised hopes central banks around the world would act to stimulate economies.
The most active rebar contract for October delivery on the Shanghai Futures Exchange gained nearly 1 percent to 4,079 yuan a tonne by the midday break, after hitting one-month lows on Monday.
Shanghai rebar futures and iron ore indexes at 0451 GMT
Contract Last Change Pct Change
SHFE REBAR OCT2 4079 +35.00 +0.87
PLATTS 62 PCT INDEX 135.25 +0.00 +0.00
THE STEEL INDEX 62 PCT INDEX 133.5 -0.50 -0.37
METAL BULLETIN INDEX 134.4 -1.09 -0.80
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day