* Dalian, SGX iron ore benchmarks up over 5% this week
* China's week-long Lunar New Year break begins on Thursday
* Tight global iron ore supply seen to persist in 2021 (Updates prices, adds chart)
By Enrico Dela Cruz
Feb 10 (Reuters) - Dalian iron ore jumped to its highest in three weeks on Wednesday and was set for a weekly gain of more than 5%, buoyed by hopes of improved demand for the steelmaking ingredient after the Lunar New Year holiday in China.
Top steel producer China, home to the world's most liquid iron ore futures market, heads into a week-long holiday beginning Thursday.
May iron ore on China's Dalian Commodity Exchange DCIOcv1 rose 2.4% to 1,071.50 yuan ($166.43) a tonne by 0730 GMT, after earlier touching 1,072 yuan, advancing for a fifth straight session to the highest since Jan. 22.
March iron ore on the Singapore Exchange SZZFH1 climbed 1.5% to $160.95 a tonne.
Despite thin pre-holiday trade, the SGX benchmark was also on track for a weekly gain of more than 5%, with a positive outlook for steel industries outside China providing a boost.
Spot iron ore bound for China traded at a two-week high of $161 a tonne on Tuesday, according to SteelHome consultancy. SH-CCN-IRNOR62
Support is also intact from tight global supply that may persist this year, despite additional output expected from Brazil's Vale VALE3.SA .
"Supply increases from the low-cost majors will be restrained again," said Justin Smirk, senior economist at Westpac Group in Australia, forecasting a deficit of around 27 million tonnes this year.
"Australian miners' output is expected to lift only marginally, leaving the Brazilian giant, Vale, crucial to the overall recovery in supply," Smirk said.
Westpac expects global crude steel output to rise around 5% this year, with production seen rising 2% in China. It projects a 4% rise in Chinese iron ore imports, after a 12% increase last year.
Rebar on the Shanghai Futures Exchange SRBcv1 rose 0.8%, while hot-rolled coil SHHCcv1 added 0.7%. Stainless steel SHSScv1 advanced 0.6%.
Coking coal DJMcv1 slipped 0.1%, while coke DCJcv1 dipped 1.1%.
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