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UPDATE 2-German metals recycler Befesa's shares gain on Frankfurt debut

* Shares outperform roughly flat market

* Shares priced at low end of 28-38 euro range

* Difficulty defining peer group weighed on demand - sources (Adds statistics on IPO markets)

FRANKFURT, Nov 3 (Reuters) - Shares in German metals recycling group Befesa rose more than 7 percent from a low starting price on their first day of trading on Friday, effectively concluding a meagre year for initial public offerings on the Frankfurt stock exchange.

Shares in Befesa, majority-owned by private equity investor Triton, opened at the offer price of 28 euros, a price that was set at the low end of the subscription range.

Befesa's was Germany's second-largest stock market flotation this year after online takeaway food delivery group Delivery Hero and ahead of meal kit group HelloFresh, which listed on Thursday.

Germany has seen few IPOs this year, but mainly due to a lack of readiness rather than a lack of investor appetite at a time of rising share prices, investment bankers said.

German companies saw IPO proceeds of only $2.6 billion so far this year, less than half of last year's level and the lowest in five years, according to ThomsonReuters data. It accounted to only 6.5 percent of European IPO proceeds, down from 16.4 percent in 2016.

But Deutsche Boerse is not the only exchange to suffer from a relative dearth of new listings this year. On Friday two of the London Stock Exchange's biggest floats planned for this year were abandoned after they failed to attract sufficient interest from investors.

And while only smaller deals are expected for the remainder of the year in Germany, 2018 looks more promising with some large deals looming, such as the listing of Siemens' Healthineers unit and Deutsche Bank's asset management arm, as well as IPOs for vehicle components suppliers Knorr and Vibracoustic and science publisher Springer Nature.

People close to Befesa's IPO said that the difficulty of defining a peer group had weighed on investor demand.

"It's a business services company, but at the same time a metals group," one of the people said.

Befesa collects steel dust from so-called mini-mills that melt scrap to produce new steel.

While it gets fees for accepting hazardous waste, it generates up to 90 percent of sales at its steel unit by selling zinc it extracts from the steel dust to companies such as Glencore, Nyrstar or Korea Zinc. It has a similar, but smaller aluminium operation.

Befesa, which controls almost half of Europe's steel dust recycling market, said the IPO raised up to 461 million euros ($537 million) for Triton, assuming full take-up of an over-allotment option.

No new shares were sold. The offering, which gave the company a market capitalisation of 954 million euros, consisted only of existing shares from Triton, whose stake is dropping to 51.7 percent.

The listing gives Befesa a valuation of just below 10 times its expected core earnings. Companies offering roughly comparable activities - like Waste Connections, Stericycle, US Ecology, Umicore and Ecolab - trade at 10-15 times their expected core earnings.

Befesa was listed in Spain from 1998 to 2011. Spanish group Abengoa bought a controlling stake in 2000 and later squeezed out minorities. It sold the company to Triton in 2013 for 850 million euros in cash, or 1.1 billion euros including debt. ($1 = 0.8591 euros) (Reporting by Arno Schuetze; Editing by Tom Sims, Greg Mahlich and Alexander Smith)