* Spot iron ore at 3-month high, has gained nearly 8 pct this week
* Buyers snapped up cargoes after return from Lunar New Year
* Shanghai rebar rises to highest since September
By Manolo Serapio Jr
MANILA, Feb 19 (Reuters) - Iron ore climbed to a new high for the year and is on course to post its fourth weekly gain out of five as firmer Chinese steel prices spurred producers to restock.
The steelmaking raw material began the week strong, surging nearly 6 percent on Monday as buyers snapped up spot cargoes after last week's Lunar New Year holiday.
"There's been restocking going on in the Chinese steel market," said Daniel Hynes, commodity strategist at ANZ Bank.
"We've seen a bit of tightening in that market as well which has certainly allowed steel prices to inch higher and that has given steel mills more room to purchase some iron ore."
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI rose 1.5 percent to $46.50 a tonne on Thursday, its loftiest since Nov. 16, according to The Steel Index (TSI), which assesses prices.
The spot benchmark has risen 7.6 percent for the week so far. If the gain hits 8 percent or more, it would be the biggest such increase since April last year.
"Traders' offers held firm owing to a greater level of enquiries and higher iron ore futures prices," TSI said.
The most-traded May iron ore on the Dalian Commodity Exchange DCIOcv1 was up 2.5 percent at 349 yuan ($53.53) a tonne by 0311 GMT, just off the session high of 349.50 yuan, its strongest since Oct. 12.
Along with iron ore, steel futures were also on the rise. The most-active May rebar on the Shanghai Futures Exchange SRBcv1 touched a near-five month high of 1,890 yuan a tonne.
Tightness in steel supply in China following the closure of some mills had helped lift prices this year, and a pickup in underlying demand could strengthen the market further, traders and analysts say.
Some mills have shut in response to weak demand in China as the economy grew last year at its slowest pace in a quarter of a century. Hynes doesn't think the rally would last, saying a still oversupplied market should keep iron ore between $35 and $45 a tonne this year.
Brazilian miner Vale SA VALE5.SA , the world's top iron ore producer, said fourth-quarter iron ore output reached 88.4 million tonnes, its largest ever fourth-quarter total. and iron ore prices at 0311 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
1885
+24.00
+1.29 DALIAN IRON ORE DCE DCIO MAY6
349
+8.50
+2.50 SGX IRON ORE FUTURES MAR
45.7
+0.35
+0.77 THE STEEL INDEX 62 PCT INDEX
46.5
+0.70
+1.53 METAL BULLETIN INDEX
47.14
+0.79
+1.70
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.5200 Chinese yuan)