NEW YORK (Reuters) - Steelmakers and producers of iron ore and copper are likely to be big winners from China's $586 billion economic stimulus plan, but analysts cautioned it could be a while before there is a boost in demand and prices.

Prices of industrial metals and other commodities enjoyed a run-up in the first half of 2008, but prices have been in free fall over the last two months as companies' have slashed manufacturing.

A sharp decline in metal demand from China, which has been the world's growth engine in recent years, has forced the world's largest iron ore producers and steelmakers to slash output in recent weeks.

The Chinese stimulus plan, which on Monday sparked a rally in base metal prices, will be focused largely on infrastructure and social projects.

Credit Suisse analyst Michael Shillaker sees steel demand and prices rebounding and expects ArcelorMittal (ISPA.AS: Quote, Profile, Research, Stock Buzz) (MT.N: Quote, Profile, Research, Stock Buzz) (MTP.PA: Quote, Profile, Research, Stock Buzz) to be one of the big gainers.

"As we have said previously, China looks ready to rebound sharply when confidence returns to the market and this announcement from the (Chinese) government is likely to restore that," said Shillaker, in a note to clients.

ArcelorMittal, the world's largest steelmaker, last week posted third-quarter results that fell short of expectations. It also put growth plans on hold and curtailed production by as much as 30 percent, in response to the global economic slowdown.

Shares of ArcelorMittal, which have fallen 77 percent in the last six months, rose as much as 13.3 percent Monday, on the New York Stock Exchange. Shares of the steelmaker closed up 3.8 percent at $23.15.

OTHER COMMODITIES BENEFIT

China's announcement drove shares of most major metals and mining companies across the globe higher. The Dow Jones Titans Basic Resources Index , which has fallen 63.7 percent since May, ended the day up 7.4 percent.

Analysts expect miners of iron ore, copper and other base metals to also benefit from the Chinese stimulus plan.

Sylvain Brunet of Exane BNP Paribas said that China accounts for 55 percent of overseas iron ore exports, as well a large portion of global demand for commodities like coking coal, carbon steel and aluminum.

"China's disproportionate weight in metals consumption shall therefore impact significantly on the supply-demand equations of numerous metals," said Brunet.

Brazilian mining giant Vale (VALE5.SA: Quote, Profile, Research, Stock Buzz), for example, said recently it would cut iron ore output 10 percent due to weakening demand. Rio Tinto (RIO.AX: Quote, Profile, Research, Stock Buzz) (RIO.L: Quote, Profile, Research, Stock Buzz), the world's second-largest iron ore miner behind Vale, has also said it will cut its 2008 iron ore shipments from Australia by 10 percent.

"With both the mining and steel manufacturers still busy cutting output as a response to the recent slowdown, a number of these (metals) markets could look rebalanced again by Q2 next year," said Brunet, in a research note.

Brunet sees the stimulus plan as a big positive for mining major BHP Billiton (BHP.AX: Quote, Profile, Research, Stock Buzz) (BLT.L: Quote, Profile, Research, Stock Buzz) and ArcelorMittal.

Shares of Rio closed 8.6 percent higher on the London Stock Exchange, while those of BHP ended the day up 10.6 percent. Vale's shares closed 3.9 percent higher on the Brazilian Stock Exchange.

But despite the optimism surrounding the stimulus plan, analysts remained pragmatic and see metal and mining companies beginning to benefit in the middle of 2009, at the earliest.

"I'm not sure if policy decisions by governments, centrally planned or otherwise have ever made an immediate difference," said one analyst, who asked not to be named. "Undoubtedly it is going to make a difference, it's just a question of some time lag."