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

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* 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 fellover 1 percent on Thursday after a three-day climb as theoutlook for Chinese demand remained hazy despite recent gains inprices, while iron ore hit its highest since July as millscontinued to replenish stockpiles.

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

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

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

Steel consumption in China, the world's largest producer andconsumer, will grow 2.5 percent and 3.1 percent in 2012 and2013, to 639.5 million tonnes and 659.2 million tonnes,respectively, the association said.

The most traded rebar contract for January delivery on theShanghai Futures Exchange

fell nearly 2 percent to asession low of 3,611 yuan ($570) per tonne, before closing down1.3 percent at 3,634 yuan.

China's steel prices, both futures and spot, are stabilisingafter recent gains "and buyers are assessing whether end-userdemand will pick up significantly", said a Shanghai-basedtrader.

"Demand growth in China is still slow and the medium- tolong-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 mainproducts unchanged for a second straight month in November,surprising many in the market who had expected a hike after arecent run-up in spot prices.

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

raising prices.

"While some may attribute the sideways move to caution fromBaosteel about the outlook, we think the move is likely areflection of the fact that Baosteel's list prices are alreadysignificantly 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 thanWuhan's after its latest adjustment, SMI said it expects othersteelmakers 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 SteelIndex.

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

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

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

Shanghai rebar futures and iron ore indexes at 0705 GMT

Contract Last Change Pct ChangeSHFE REBAR JAN3 3634 -48.00 -1.30PLATTS 62 PCT INDEX 118.75 -1.50 -1.25THE STEEL INDEX 62 PCT INDEX 117.7 +0.50 +0.43METAL BULLETIN INDEX 119.09 -0.23 -0.19Rebar 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)(ReutersMessaging: manolo.serapio.reuters.com@reuters.net))

Keywords: MARKETS IRONORE/