* Rebar producer Shagang Group cuts prices
* Shanghai rebar steadies after hitting contract low
By Manolo Serapio Jr and Ruby Lian
SINGAPORE/SHANGHAI, July 12 (Reuters) - Bids for spot iron ore cargoes were scarce on Thursday, reflecting limited appetite from steel producers in top consumer China, some of whom continued to cut prices amid weak demand.
Shagang Group, China's largest private steel mill and a major supplier of reinforcing steel bar, on Thursday cut rebar prices by 70 yuan ($11) per tonne for mid-July bookings, traders said.
Officials from Shagang, in eastern China, were not immediately available for comment. The move follows other producers including industry pricing leader Baosteel, which earlier cut prices for July, its first reduction this year as it responds to slack demand.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange slipped to a contract low of 3,896 yuan a tonne, before regaining ground to trade flat at 3,929 yuan by the midday break.
"The physical market keeps falling these days, and Shagang cut its rebar prices, while the overall global commodity futures market is in a downturn," said Zhang Chunzi, an analyst with SDIC CGOC Futures in Beijing, explaining the drop in Shanghai rebar futures.
Commodities from oil to copper and gold were steady to weaker as investors opted for caution ahead of data on Friday likely to show that China's GDP growth hit a three-year low in the second quarter. The U.S. Federal Reserve holding off on more economic stimulus also weighed on sentiment.
With the weakness in steel, there was little appetite among Chinese mills to buy iron ore, the key raw material.
"Our clients are checking our cargoes, but we have not seen any real interest to buy. The gap between their bids and our offers is quite big, about $5-$6," said a physical iron ore trader in Shanghai.
TAKING A HIT
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI dropped 1.1 percent to $134 a tonne on Wednesday, according to Steel Index, the largest percentage drop in two weeks.
Demand for steel and iron ore in China is taking a hit along with the overall economy, with steel prices down nearly 5 percent and iron ore off more than 3 percent this year.
"Sentiment is bearish, there's more room for prices to fall than rise," said a Hong Kong-based trader.
Miners sold cargoes on Wednesday at prices that were $2-$3 per tonne lower than prior tenders, traders said. Vale sold 65-percent grade Brazilian Carajas iron ore fines at $144.10 a tonne versus a previous deal of $147.10 and BHP Billiton sold 57.7-percent grade Australian Yandi fines at $122, down from $124.50 previously.
Rio Tinto sold 61.5-percent grade Australian Pilbara iron ore fines at $135.5 a tonne through the China Beijing International Mining Exchange's platform, lower than its offer of $137, traders said.
"A lot of the mills are now buying port stocks instead of the new cargoes. They're only $1-$2 cheaper but you can buy smaller volumes from the ports," said the Shanghai trader.
To meet short-term needs, mills can usually purchase 10,000 tonnes from iron ore stockpiled at Chinese ports, which is just a fraction of the cargoes that miners offer on the spot market, some of which can go up as much as 250,000 tonnes.
Shanghai rebar futures and iron ore indexes at 0510 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3929 +1.00 +0.03
PLATTS 62 PCT INDEX 135 -1.00 -0.74
THE STEEL INDEX 62 PCT INDEX 134 -1.50 -1.11
METAL BULLETIN INDEX 135.08 -1.93 -1.41
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3686 Chinese yuan)