* Chinese iron ore futures rise for third day with steel
* Rio Tinto says would cut output to boost cash flow
By Manolo Serapio Jr
MANILA, Nov 24 (Reuters) - Iron ore futures in China rose another 6 percent on Thursday to extend a rally into a third day and hit the highest level in almost three years, supported by firmer steel prices in the world's top consumer.
The recovery in futures from last week's slide had lifted the price of spot iron ore by nearly 8 percent in two days as physical buyers chased higher prices.
The most-traded January iron ore on the Dalian Commodity Exchange DCIOcv1 was up 6.1 percent at 644.50 yuan ($93) a tonne by 0255 GMT.
The contract touched 658.50 yuan earlier, its loftiest since February 2014. It rose by its 6-percent and 9-percent trade limits on Tuesday and Wednesday, respectively. The exchange set the limit for Thursday at 11 percent.
China's steel capacity closures have helped tighten supply, spurring steel prices higher and dragging raw material prices with them, said ANZ commodity strategist Daniel Hynes.
Fresh anti-pollution measures in Tangshan, which accounts for around 12 percent of China's total steel output, could push steel prices higher, he said.
Tangshan in China's northern Hebei province has ordered many of its industrial factories, including steel mills, to curb production or even close for as long as four months through to March in a bid to clear the skies of smog. price of construction steel product rebar on the Shanghai Futures Exchange SRBcv1 climbed 2.2 percent to 2,978 yuan a tonne, also rising for a third session.
The risk of supply disruptions from top iron ore exporter Australia could keep the price of the steelmaking raw material elevated in the short term, said Hynes.
"Forecasts for an above-average number of cyclones in Western Australia could hit iron ore exports," he wrote in a report. Over the past 12 years, Australia's iron ore exports have dropped an average of 5.4 percent in January-March from the previous quarter, he said.
"With the spectre of increased disruptions and a subsequently tighter market, steel mills are likely to continue restocking in the short term," Hynes said.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB rose 1.3 percent to $75.87 a tonne on Wednesday, according to Metal Bulletin. That brought its two-day gain to 7.9 percent.
Rio Tinto RIO.AX RIO.L would not hesitate to cut its iron ore production if that would help boost its free cash flow and the company is not chasing market share, CEO Jean-Sébastien Jacques said. = 6.9192 Chinese yuan)