* China has cut 88 mln T steel capacity this year vs 45 mln T goal
* Shanghai rebar hits upside limit
* Dalian iron ore rises nearly 5 pct (Updates prices)
By Manolo Serapio Jr
MANILA, Nov 25 (Reuters) - Shanghai rebar steel futures rallied 7 percent on Friday to end near a 30-month high after China said it has cut 88 million tonnes of steel capacity this year, nearly double its target.
Large-size Chinese steelmakers had phased out 40.75 million tonnes of production capacity up to September and reductions by smaller companies brought the total to 88 million tonnes, Chinese Vice Premier Liu Yandong said on Thursday. was well above China's pledge to cut 45 million tonnes in steel production capacity this year and puts it well ahead of its plan to reduce its steel capacity by 100-150 million tonnes over the next three to five years, analysts say.
"China may be able to achieve its target by next year," said Helen Lau, analyst at Argonaut Securities in Hong Kong.
"Capacity is being controlled and the steel market may be rebalanced quickly."
Rebar, a construction steel product, on the Shanghai Futures Exchange SRBcv1 surged by its 7-percent trade limit to close at 3,154 yuan ($456) a tonne.
That was near its Nov. 14 peak of 3,220 yuan, the highest since May 2014.
Gains in steel pulled up raw material iron ore. The most-traded iron ore on the Dalian Commodity Exchange DCIOcv1 closed up 4.6 percent at 653.50 yuan a tonne. Earlier, it hit 656.50 yuan, near Thursday's 33-month high of 658.50 yuan.
Stronger futures should also push up spot iron ore prices which have rebounded almost 6 percent this week after dropping 8.8 percent last week.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB rose 1.4 percent to $76.93 a tonne on Thursday, according to Metal Bulletin.
The surging volatility in China's iron ore futures is sending global prices on a roller-coaster ride, spelling risks for traders and steel mills, some of whom are losing faith in a market swayed by speculative Chinese money. Wednesday, the most-active iron ore contract on Dalian posted its most volatile trading day since July 2015 when futures prices hit their lowest since the contract began in 2013, based on Thomson Reuters data. ($1 = 6.9130 Chinese yuan)