* Gap between high-grade, low-grade iron ore widest in a month
* Dalian coke futures not far below 3-yr peak
By Manolo Serapio Jr
MANILA, Oct 27 (Reuters) - Iron ore futures in China climbed more than 1 percent to hold near 26-month highs on Thursday, reflecting firm demand for high-grade material as Chinese steel producers boost productivity to use less coal.
The spot price for high-grade iron ore rose to the highest since April and its premium to low-grade material widened to the most in a month.
"I don't think there's a shortage in high-grade (iron ore) but demand for high-grade is big because of costing factors," said a Shanghai-based iron ore trader.
Iron ore for January delivery on the Dalian Commodity Exchange DCIOcv1 was up 1.2 percent at 480.50 yuan ($71) a tonne by 0212 GMT, marking its fourth consecutive session of gains.
The contract touched 484.50 yuan earlier, near Wednesday's peak of 487.50 yuan which was the highest since August 2014.
Government-led capacity cuts have prompted a shortage of coal in China, including coking coal and coke used to make steel, lifting prices to multi-year highs.
"I don't think in the next couple of months we have any solution for the coal problem," the trader said.
Dalian coke DCJcv1 was up 0.2 percent at 1,711.50 yuan per tonne, having hit 1,765 yuan on Wednesday, its highest since August 2013. Coking coal DJMcv1 dipped 0.5 percent to 1,283 yuan, after reaching a contract high of 1,332 yuan the session before.
There was firm appetite for iron ore cargoes in the physical market, with an Australian miner selling a shipment of 61-percent grade iron ore at more than a dollar higher on Wednesday from the previous day's tender, according to The Steel Index (TSI) which tracks deals.
In China, prices of imported iron ore stocked at Chinese ports rose by 5 yuan per tonne, TSI said.
Benchmark 62-percent grade iron ore for delivery to China's Tianjin port .IO62-CNI=SI rose 1.8 percent to $62.70 a tonne on Wednesday, its strongest since April 29, according to TSI.
Iron ore with iron content of 60 percent and above is considered high-grade and the gap between the 62-percent benchmark and 58-percent grade .58LA-CNI=SI had widened to $8.70 a tonne on Wednesday, the most since Sept. 23.
($1 = 6.7767 Chinese yuan)