* Spot iron ore down 8 pct this week
* Dalian iron ore futures have fallen 16 pct from peak
* China steel capacity cuts may cap iron ore demand - Argonaut (Updates prices)
By Manolo Serapio Jr
MANILA, Nov 18 (Reuters) - Spot iron ore prices were headed for their first weekly loss in six on Friday, as sliding futures and signals of slower Chinese demand for the steelmaking raw material pulled the commodity away from a two-year high.
Chinese iron ore futures have fallen 16 percent from Monday's 33-month peak as speculators pulled out of commodities markets after exchanges hiked trading costs to rein in recent sharp gains.
"There's a bit of cooling off in speculative trading and when things settle down, people will look at fundamentals," said Argonaut Securities analyst Helen Lau.
China's heightened efforts to address overcapacity in its bloated steel sector suggest limited demand for iron ore going forward, Lau added.
The most-traded January iron ore on the Dalian Commodity Exchange DCIOcv1 closed down 2.2 percent at 551 yuan ($80) a tonne.
Those losses could weigh on the spot iron ore benchmark which stood at $73.55 a tonne on Thursday .IO62-CNO=MB , according to Metal Bulletin.
The spot iron ore benchmark was up 1.6 percent from Wednesday, but has lost 7.9 percent so far this week. It gained a record 23 percent last week after touching $79.81 on Nov. 11, its highest level since October 2014.
In a bid to fight pollution, China has ordered industrial plants including steel mills to suspend production. The country is focusing its efforts in the northern region where the top steel producing province Hebei is located.
Lau said Hebei will suspend production of steel, coke and cement for several days to combat pollution.
On Friday, Xinhua News reported the northern city of Shijiazhuang has suspended factory production in seven industries until the end of the year, including steel. this capacity consolidation in China continues or if these suspensions continue to affect steel production, that certainly will cap demand for iron ore," said Lau.
Other steelmaking raw material futures also dropped, with coking coal DJMcv1 falling 4.1 percent to 1,485 yuan a tonne and coke DCJcv1 down 1.5 percent at 2,010 yuan.
Rebar, a construction steel product, dropped 0.5 percent to 2,772 yuan per tonne on the Shanghai Futures Exchange SRBcv1 .
($1 = 6.8907 Chinese yuan)