Iron ore seen steady this week with China shut

* China factory activity shrinks for 2nd month

* Chian on public holiday Oct. 1-5

By Manolo Serapio Jr

SINGAPORE, Oct 1 (Reuters) - Spot iron ore prices are unlikely to stray from current levels this week with top importer China on a public holiday, with fresh evidence of slower growth in the world's No. 2 economy likely to keep the pressure on prices.

Iron ore prices fell more than 22 percent in the third quarter in their steepest quarterly drop ever, as China's slowdown dented demand for steel and, consequently for the raw material needed to make it.

China's economy offered more evidence of a seventh straight quarter of slowing growth on Monday, with an official survey of factory managers remaining in contractionary territory for a second straight month in September.

China's official factory purchasing managers' index rose to 49.8 in September from a nine-month low of 49.2 in August, the National Bureau of Statistics said, but remained below the 50-mark which separates expansion from contraction.

But a week-long public holiday in China should keep market activity limited, trapping prices at current levels.

"I don't expect to see much action this week in the spot market given China's on holiday," said a Singapore-based trader.

Benchmark iron ore with 62 percent iron content

was unchanged at $104.20 a tonne on Friday, according to data provider Steel Index.

The price rose nearly 17 percent in September after five consecutive months of decline, tracking a rebound in steel prices spurred by hopes China's approval of 1 trillion yuan in infrastructure projects would revive demand.

But the gain was not enough to offset losses in the past two months, leaving iron ore with a 22.2 percent loss for the third quarter, the biggest since the Steel Index began compiling its data in 2008.

Activity on the spot market for global seaborne iron ore cargoes had thinned out since late last week, even ahead of China's Golden Week break, with traders saying a majority of Chinese steel mills had completed their restocking of the raw material. Iron ore indexes Last Change Pct Change PLATTS 62 PCT INDEX 106.5 +0.00 +0.00 THE STEEL INDEX 62 PCT INDEX 104.2 +0.00 +0.00 METAL BULLETIN INDEX 106.46 -0.13 -0.12

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

(Editing by Himani Sarkar)

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