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UPDATE 1-Shanghai steel falls on demand doubts, iron ore at 11-week top

* Worldsteel cuts 2012, 2013 global consumption forecasts

* Baosteel keeps prices steady for 2nd straight month

* Iron ore rally may soon stall after rapid price rise

(Updates rebar price) By Manolo Serapio Jr

SINGAPORE, Oct 11 (Reuters) - Shanghai steel futures fell over 1 percent on Thursday after a three-day climb as the outlook for Chinese demand remained hazy despite recent gains in prices, while iron ore hit its highest since July as mills continued to replenish stockpiles.

Iron ore prices have surged 13 percent between Monday and Wednesday after the Chinese snapped up spot cargoes to boost run-down inventories following a week-long break.

But a speedy rise in prices is prompting caution among some steel producers whose margins are only starting to improve with the recovery in steel prices from last month's low, which was the weakest since Shanghai rebar futures were launched in 2009.

The World Steel Association has cut its global steel consumption forecast by nearly 1 percent in 2012 and by 2 percent next year compared to previous estimates.

Steel consumption in China, the world's largest producer and consumer, will grow 2.5 percent and 3.1 percent in 2012 and 2013, to 639.5 million tonnes and 659.2 million tonnes, respectively, the association said.

The most traded rebar contract for January delivery on the Shanghai Futures Exchange

fell nearly 2 percent to a session low of 3,611 yuan ($570) per tonne, before closing down 1.3 percent at 3,634 yuan.

China's steel prices, both futures and spot, are stabilising after recent gains "and buyers are assessing whether end-user demand will pick up significantly", said a Shanghai-based trader.

"Demand growth in China is still slow and the medium- to long-term outlook remains uncertain," he said.

BAOSTEEL SURPRISE

China's largest listed steelmaker, Baoshan Iron and Steel

, said on Wednesday it will keep prices of its main products unchanged for a second straight month in November, surprising many in the market who had expected a hike after a recent run-up in spot prices.

Baosteel's pricing decisions usually set the benchmark for China's steel sector, although other steelmakers appear to be more bullish, with rival Wuhan Iron and Steel

raising prices.

"While some may attribute the sideways move to caution from Baosteel about the outlook, we think the move is likely a reflection of the fact that Baosteel's list prices are already significantly higher than both peer and spot market prices," Steel Market Intelligence (SMI) said in a note.

With Baosteel's prices around 1.1-13.5 percent higher than Wuhan's after its latest adjustment, SMI said it expects other steelmakers to follow Wuhan's move.

Benchmark iron ore with 62 percent iron content

rose 0.4 percent to $117.70 a tonne on Wednesday, its highest since July 25, according to data provider Steel Index.

The price gain was much slower than the increase of around 6 percent each for Monday and Tuesday, suggesting buyers are turning cautious.

"Demand is still quite healthy. We have seen more inquiries from clients who maybe not willing to take higher prices, but they will be there to repeat the last deals," said a shipping manager for an iron ore trading firm in Shanghai.

"Buyers are very cautious if prices go beyond $120. We'll probably see prices between $110 and $120 for this week and next," he said, adding his company has sold about 30,000-40,000 tonnes of port stockpiles so far this week and is keen on buying some cargoes.

Shanghai rebar futures and iron ore indexes at 0705 GMT

Contract Last Change Pct Change SHFE REBAR JAN3 3634 -48.00 -1.30 PLATTS 62 PCT INDEX 118.75 -1.50 -1.25 THE STEEL INDEX 62 PCT INDEX 117.7 +0.50 +0.43 METAL BULLETIN INDEX 119.09 -0.23 -0.19 Rebar in yuan/tonne

Index in dollars/tonne, show close for the previous trading day

($1 = 6.2833 Chinese yuan) (Editing by Himani Sarkar)

((manolo.serapio@thomsonreuters.com)(+65 6870 3884)(Reuters Messaging: manolo.serapio.reuters.com@reuters.net))

Keywords: MARKETS IRONORE/