* Rapid rise in steel prices is resurrecting 'zombie' mills
* Supply cuts at major miners also aiding iron ore
* Spot iron ore at highest since June 2015
By Manolo Serapio Jr
MANILA, April 21 (Reuters) - Steel futures in China extended their rally into a fourth day on Thursday, surging nearly 8 percent to hit their highest since September 2014 amid brisk restocking demand on hopes consumption will remain firm.
Iron ore futures on the Dalian exchange climbed 6 percent, also to a 19-month peak, which could push the spot benchmark to fresh highs towards $70 a tonne. Supply cuts at major miners also supported iron ore prices.
Construction-used rebar for October delivery on the Shanghai Futures Exchange SRBcv1 rose as far as 2,755 yuan ($425) a tonne and was up 6.8 percent at 2,736 yuan by midday.
On the Dalian Commodity Exchange, September iron ore DCIOcv1 rose 6 percent to hit the exchange-set ceiling of 474 yuan, also the highest since September 2014. It was last up 5.5 percent at 472 yuan.
Tighter supplies following plant shutdowns last year, restocking by consumers and a pick-up in seasonal demand have combined to lift steel prices in China, with Shanghai steel futures up 76 percent from the 2015 trough.
Inventory of steel products held by Chinese traders stood at 11 million tonnes at the end of March, down 28 percent from a year ago and fell further to 9.8 million tonnes on April 15, said Helen Lau, analyst at Argonaut Securities.
"Therefore, we are of the view that steel prices may extend their rally through to the second quarter," Lau said.
This year's rapid rise in steel prices has spurred once-shut mills in China to resume production as profit margins climb to the highest in at least two years. is also lifting appetite for raw material iron ore. Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI jumped 4.1 percent to $64.30 a tonne on Wednesday, its strongest since June 2015, according to The Steel Index.
Supply cuts from the world's top four iron ore miners also supported prices. Vale VALE5.SA , Rio Tinto (LON:RIO) RIO.AX , BHP Billiton (LON:BLT) BHP.AX and Fortescue Metals Group FMG.AX over the last quarter ran at an annualized operating rate 90 million tonnes below the previous quarter.
Combined with this week's announced production downgrades, analysts say this supports expectations that mining companies are responding to supply-side concerns, albeit subtly.
($1 = 6.4766 Chinese yuan)