* Spot iron ore at 11-week high on hopes of post-holiday strength
* Has gained nearly 8 pct this week
* China says to cut steel capacity by 100 mln-150 mln T in 5 years (Adds comment, updates prices)
By Manolo Serapio Jr
MANILA, Feb 5 (Reuters) - Iron ore finished the week with its biggest weekly gain since last April, after racing to its highest since November 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 fuelled iron ore's rally, traders said. Trading activity was limited on Friday just before the holiday break.
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 was unchanged at $44.70 a tonne on Friday according to price assessor The Steel Index (TSI).
That price was the highest since Nov. 20 when struck on Thursday. For the week, the steelmaking raw material gained 7.7 percent, its largest such increase since late April last year when it jumped more than 12 percent.
After this week's run-up that saw some market participants take long positions in anticipation of a stronger market after China's holiday, TSI said trading activity on Friday was "extremely limited".
Some traders doubted the price 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 this week may have been traders taking positions.
Iron ore futures retreated after recent sharp gains. The most-traded May iron ore on the Dalian Commodity Exchange DCIOcv1 closed down 0.3 percent at 335.50 yuan ($51) a tonne, after jumping more than 4 percent on Thursday. Singapore Exchange iron ore 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 (CISA).
Its' output last year dropped for the first time since 1981 to 803.8 million tonnes, CISA said.
Rebar and iron ore prices at 0708 GMT
Contract
Last
Change Pct Change SHFE REBAR MAY6
1843
+1.00
+0.05 DALIAN IRON ORE DCE DCIO MAY6
335.5
-1.00
-0.30 SGX IRON ORE FUTURES MAR
43.56
-0.15
-0.34 THE STEEL INDEX 62 PCT INDEX
44.7
0.00
0.00
Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne ($1 = 6.5694 Chinese yuan)