* Spot iron ore at 11-week high on hopes of post-holiday strength
* China says to cut steel capacity by 100-150 mln T in 5 years
By Manolo Serapio Jr
MANILA, Feb 5 (Reuters) - Iron ore is on course to end the week with its biggest weekly gain since last April, after racing to an 11-week high as buyers snapped up spot cargoes ahead of the Lunar New Year holiday.
Slower shipments from top suppliers Australia and Brazil amid weather risks while Chinese buyers restocked ahead of the Feb. 8-12 break fueled iron ore's rally, traders said, although some market participants were unsure whether the strength would be sustained after next week.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI rose 1.6 percent to $44.70 a tonne on Thursday, the highest since Nov. 20, according to price assessor The Steel Index (TSI).
The steelmaking raw material has gained 7.7 percent this week, so far its largest such increase since late April last year when it jumped more than 12 percent.
While many market participants were already out for the Chinese New Year, "some were still looking to take long positions in anticipation of a stronger post-holiday market", TSI said.
But some traders doubted the gains would extend.
"We have chatted with many mills but most of the feedback we got was that they already had enough stocks," said a Shanghai-based trader, adding that buying may have been traders taking positions.
Iron ore futures retreated on Friday after recent sharp gains. The most-traded May iron ore on the Dalian Commodity Exchange DCIOcv1 was down 0.9 percent at 333.50 yuan ($50.78) a tonne by 0326 GMT, after jumping more than 4 percent on Thursday. Singapore exchange contracts 0#SZZF: also edged lower.
"We see prices returning to $40/tonne as surplus risks mount, unless the recent pickup in China's steel sector is maintained," Commonwealth Bank of Australia said in a note.
China will cut crude steel capacity by 100 million-150 million tonnes within the next five years and will ban new steel projects as it tackles a chronic glut, the country's cabinet said on Thursday. the world's biggest steel producer and consumer, now has an annual crude steel capacity of 1.2 billion tonnes, according to the China Iron and Steel Association. Output last year dropped for the first time since 1981 to 803.8 million tonnes.
Rebar and iron ore prices at 0326 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
1832
-10.00
-0.54 DALIAN IRON ORE DCE DCIO MAY6
333.5
-3.00
-0.89 SGX IRON ORE FUTURES MAR
43.61
-0.10
-0.23 THE STEEL INDEX 62 PCT INDEX
44.7
+0.70
+1.59 METAL BULLETIN INDEX
45.52
+0.89
+1.99
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.5681 Chinese yuan)