* Shanghai rebar at contract low, eyes worst week since Oct
* Iron ore closing in on 2011 trough
* Steel, iron ore may stretch losses on thin China demand
By Manolo Serapio Jr
SINGAPORE, July 20 (Reuters) - Shanghai rebar futures hit a contract low for the eighth time in nine sessions on Friday, and are set to post their worst week since October as weak Chinese demand kept the pressure on prices, pulling down iron ore to 8-1/2-month lows.
Miners have curbed spot sales of iron ore amid the thin appetite from Chinese steel mills, the biggest buyers of the raw material, and concern unloading more cargoes into the market would fuel a further drop in prices, traders said.
"It looks like the trend will continue next week. There is very limited trading in the open market. Sentiment is quite weak and no one is willing to buy," said a manager for an iron ore trading firm in Shanghai.
Sellers cut price offers further for some iron ore cargoes in China by $1 per tonne on Friday, after the benchmark 62-percent grade ore .IO62-CNI=SI fell for a seventh day in a row on Thursday.
Benchmark iron ore dropped 2.1 percent to $125.60 a tonne, its lowest since Nov. 7, based on data from the Steel Index.
Down more than 28 percent from a year ago, iron ore is now closing in on its 2011 low of $116.90 reached on Oct. 28 when sluggish Chinese steel demand led to production cuts. That was its lowest price since December 2009.
"Even if there's buying interest from some mills, they want a very low price," said the Shanghai manager. Miner Rio Tinto sold a shipment of 59.7-percent grade South African iron ore concentrate at $108 per tonne on Thursday, which it initially offered at $120, he said.
A slowing Chinese economy, which posted its weakest growth in three years in the second quarter, along with a seasonal lull in demand during the summer months have pressured steel prices this year.
China's daily crude steel output had eased to 1.958 million tonnes in the first 10 days of July, from a record level above 2 million tonnes in May, industry data showed this week.
The most-active rebar contract for January delivery on the Shanghai Futures Exchange hit a session trough of 3,774 yuan ($590) a tonne, before slightly paring losses to trade at 3,781 yuan by the midday break, down 1.2 percent.
For the week, rebar, which is used in construction, has lost nearly 5 percent, its steepest since falling more than 8 percent in October.
Slowing Chinese growth could create a global supply surplus of iron ore in 2013, hurting mining giants that may also find future demand for raw materials expanding more slowly than the economy as China reduces its dependency on infrastructure spending.
Some Chinese traders with iron ore stockpiles at ports have unloaded some cargoes at a loss, said an iron ore trader in Shanghai, who said he heard Australian 61.5-percent grade Pilbara iron ore fines were sold at 915 yuan a tonne, or about $127 excluding other costs.
The last time Pilbara fines were sold at that level was during the price slide in October, he said.
"Other people who have cargoes in hand have just stopped quoting prices, waiting to see what happens next week," said the trader, adding his company has opted to hold on to 300,000 tonnes of stocks.
Shanghai rebar futures and iron ore indexes at 0506 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3781 -44.00 -1.15
PLATTS 62 PCT INDEX 126.75 -1.75 -1.36
THE STEEL INDEX 62 PCT INDEX 125.6 -2.70 -2.10
METAL BULLETIN INDEX 127.42 -1.66 -1.29
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3734 Chinese yuan)