* Iron ore futures extend losses, eye weekly fall
* Recovery in steel production is slower than expected
SHANGHAI, March 25 (Reuters) - Chinese iron ore futures stretched losses on Friday to hit a one-week low, with steel mills in the world's top producer resuming production at a slower pace than earlier expected, eroding previous gains for the raw material.
The iron ore futures contract for September settlement on the Dalian Commodity Exchange DCIOcv1 dropped to a session-low of 383.5 yuan ($58.83) a tonne, its weakest since Mar. 17. It was trading 1.5-percent lower at 390.5 yuan by 0249 GMT.
"Steel mills are picking up production, but it's slower than our expectations and is unable to support iron ore prices," said Yu Yang, an analyst with Shenyin & Wanguo Futures in Shanghai.
The utilization rate of 163 domestic steel mills surveyed by industry consultancy Mysteel was marginally higher than the week before at about 76 percent, Yu added.
"However, I don't see any big declines next month as steel mills will keep increasing production while demand is on the mend."
Iron ore futures prices have gained 34 percent so far this year driven by a rally in steel prices amid a modest pickup in Chinese demand and drawdowns in inventories.
The most-traded rebar, a construction steel product, on the Shanghai Futures Exchange SRBcv1 swung between gains and losses. It was trading steady at 2,146 yuan a tonne by 0249 GMT.
Spot iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI slumped 3.1 percent to $55.50 a tonne on Thursday, according to The Steel Index. Rebar and iron ore prices at 0249 GMT
Contract
Last
Change Pct Change
SHFE REBAR OCT6
2146
+2.00
+0.09
DALIAN IRON ORE DCE DCIO SEP6
390.5
-6.00
-1.51
SGX IRON ORE FUTURES MAY
50.97
+0.97
+1.94
THE STEEL INDEX 62 PCT INDEX
55.5
-1.80
-3.14
METAL BULLETIN INDEX
56.37
-1.50
-2.59
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.5184 Chinese yuan renminbi)