* Dalian iron ore down 5 pct on week, Shanghai rebar nearly flat
* Spot iron ore up 9 pct on Thu after falling 7 pct on Wed (Updates prices)
By Manolo Serapio Jr
MANILA, Dec 2 (Reuters) - Chinese steel futures pared sharp gains on Friday and iron ore steadied after another volatile session, a feature of metals markets this year as speculative investors look for big and fast returns.
The up-and-down iron ore futures prices have led to wild swings in the physical market, with spot benchmark rates surging nearly 9 percent on Thursday after sliding about 7 percent on Wednesday.
"Clearly the speculative activity on the futures market is having an impact on the physical market," said Daniel Hynes, commodity strategist at ANZ Bank.
"I think traders are struggling to get a sense of where things are sitting on a physical basis."
The most-traded iron ore on the Dalian Commodity Exchange DCIOcv1 closed up 0.2 percent at 574 yuan ($83) a tonne after rising as much as 5.1 percent in early trading and falling up to 4.3 percent in afternoon deals.
The steelmaking raw material rose 5 percent on Thursday after sliding 8 percent in the previous two days. For the week, it lost 5 percent.
On the Shanghai Futures Exchange, rebar SRBcv1 ended 1.3 percent higher at 3,126 yuan per tonne, after climbing almost 5 percent earlier and sliding as much as 2.5 percent.
The construction steel product gained 4.8 percent on Thursday after losing nearly 7 percent on Tuesday and Wednesday and was down marginally for the week.
The volatility in China's iron ore futures soared to near a record last week, spelling risks for traders and steel mills, some of whom are losing faith in a market swayed by speculative Chinese money. it has continued this week despite sustained efforts by Chinese exchanges to raise trading charges. Hynes said the exchanges can only do so much in terms of limiting the wild swings.
"I do feel there's just a lot of money looking for a home," he said.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB surged 8.7 percent to $78.36 a tonne on Thursday, according to Metal Bulletin. For the week so far, the spot benchmark was down 1.6 percent. ($1 = 6.8839 Chinese yuan)