* Iron ore may prolong slide unless China steel prices rebound
* Buyers opt for cheaper port stockpiles
* Tighter liquidity limiting ore purchases (Adds more comment, details; updates rebar prices)
By Manolo Serapio Jr
Falling steel prices and huge stockpiles of iron ore at China ports, which had topped 80 million tonnes, are keeping mills and traders from snapping up supplies even as exports from No. 3 supplier India are bound to get more costly after the country raised export taxes on iron ore fines to 20 percent from 5 percent.
India also raised freight rates on iron ore exports, which should further curb shipments of the material out of the country that have already fallen for a seventh straight month in January.
Indian ore with 63.5 percent iron content was quoted at $183-$185 a tonne, including freight, on Friday, down from $187 the previous day, said Chinese consultancy Mysteel.
"Buying interest is very, very low. Customers are only interested in buying cargoes from the port because they're cheaper," said a Singapore-based iron ore trader.
"Unless we see Chinese steel prices go up, the interest will remain dim and mills will only be buying very minimum volumes because their order book might not be that strong."
The most active rebar contract for October delivery on the Shanghai Futures Exchange fell to as low as 4,770 yuan per tonne on Friday, its weakest since Dec. 1. It was at 4,783 yuan, down 0.6 percent, by the midday break.
Shanghai rebar futures hit a series of record highs in early February because of rising input cost and in anticipation of a pickup in Chinese construction activity in spring.
Iron ore spot prices similarly zoomed to all-time highs at that time before a correction in Chinese steel futures triggered a decline.
"I think mills have really run out of money, the liquidity tightness is affecting them. I've heard a lot of companies including steel mills are asking bankers everyday if their loan is ready," said an iron ore trader in Shanghai.
"So that might be a limiting factor."
China has been tightening monetary policy to tame inflation, both by raising interest rates and bank cash reserve requirements. Beijing has been increasing reserve requirement at a pace of about once a month since October and local media has reported another hike may be underway this month.
"Construction is very uncertain now with the new policies in place in China restricting people from buying properties. Although prices are still firm there might be some reservation about building new projects," said the Shanghai trader.
Key iron ore indexes, which global miners use in setting quarterly contract prices, extended losses on Thursday.
Platts 62 percent iron ore benchmark IODBZ00-PLT fell a dollar to $180 a tonne. It has lost 6.7 percent in the past 11 sessions since hitting a record high of $193 in mid-February.
The Steel Index's 62 percent gauge .IO62-CNI=SI slipped 10 cents to $177.90 and Metal Bulletin's index .IO62-CNO=MB dropped $1.46 to $177.83.
But forward swaps <0#sgxios:>, still at a discount to spot prices, were mostly firmer.
The Singapore Exchange-cleared April contract rose almost $3 to $165.37 a tonne, May gained $2.43 to $162.33 and June climbed $1.07 to $159.67.
(Reporting by Manolo Serapio Jr.; Editing by Ed Lane, sourced:Thomson Reuters)
Tags :Chinese steelmakers, Spot prices for 63.5% Indian fines, steel mills and iron ore traders in China, Indian iron ore exporters, Steel Index, Platts