* Gap between high-grade, low-grade iron ore widest in a month
* Iron ore gains despite selloff in coal futures (Updates prices, adds selloff in Zhengzhou thermal coal)
By Manolo Serapio Jr
MANILA, Oct 27 (Reuters) - Iron ore futures in China rose for a fourth straight session on Thursday to hover near a 26-month high on firm demand for high-grade material as Chinese steel producers boost productivity to use less coal.
The spot price for high-grade iron ore rose to the highest since April and its premium to low-grade material widened to the most in a month.
"I don't think there's a shortage in high-grade (iron ore) but demand for high-grade is big because of costing factors," said a Shanghai-based iron ore trader.
Iron ore for January delivery on the Dalian Commodity Exchange DCIOcv1 closed up 0.7 percent at 478.50 yuan ($71) a tonne. Earlier in the session, it touched 484.50 yuan, close to Wednesday's peak of 487.50 yuan, which was highest since August 2014.
The gains in iron ore came despite a selloff in coal futures following a rapid rally as government-led capacity cuts have prompted a shortage of coal in China, including coking coal and coke used to make steel, lifting prices to multi-year highs.
"I don't think in the next couple of months we have any solution for the coal problem," the trader said.
Coking coal DJMcv1 closed down 3.5 percent at 1,244 yuan a tonne, after hitting a contract high of 1,332 yuan in the previous session. Coke DCJcv1 dropped 1.9 percent to 1,675 yuan per tonne, after peaking at 1,765 yuan on Wednesday, its highest since August 2013.
The fall in Dalian coal prices followed a near 5 percent decline in Zhengzhou thermal coal futures as fee hikes aimed at curbing speculation triggered an exodus of cash. was firm appetite for iron ore cargoes in the physical market, with an Australian miner selling a shipment of 61-percent grade iron ore at more than a dollar higher on Wednesday from the previous day's tender, according to The Steel Index (TSI), which tracks deals.
In China, prices of imported iron ore stocked at Chinese ports rose by 5 yuan per tonne, TSI said.
Benchmark 62-percent grade iron ore for delivery to China's Tianjin port .IO62-CNI=SI rose 1.8 percent to $62.70 a tonne on Wednesday, its strongest since April 29, according to TSI.
Iron ore with iron content of 60 percent and above is considered high-grade and the gap between the 62-percent benchmark and 58-percent grade .58LA-CNI=SI had widened to $8.70 a tonne on Wednesday, the most since Sept. 23.
($1 = 6.7771 Chinese yuan)