* Iron ore futures extend losses, post weekly fall
* Recovery in steel production is slower than expected (Updates close prices)
By Ruby Lian and David Stanway
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 March 17. It closed 1 percent lower at 392.5 yuan a tonne.
Prices have slumped 5.3 percent this week.
"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 jumped 1.9 percent to 2,184 yuan a tonne by close. It rose 1.1 percent for the week.
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 0710 GMT
Contract
Last Change Pct Change SHFE REBAR OCT6
2184 +40.00
+1.87 DALIAN IRON ORE DCE DCIO SEP6 392.5
-4.00
-1.01
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)