* Steel mills step up output cuts on tepid demand and tight credit
* Iron ore demand sets to weaken
* Iron ore, rebar futures end the week down (Updates to add closing prices)
SHANGHAI, Nov 27 (Reuters) - Chinese iron ore futures fell on Friday amid concerns that steel mills will further cut output due to shrinking demand, weighing on consumption of the raw material in top user China.
The benchmark May iron ore futures contract on the Dalian Commodity Exchange DCIOcv1 closed 2.4 percent lower at 302.5 yuan ($47.31). It rose 1.3 percent this week.
Colder weather in northern regions is also expected to interrupt construction activities, a main consumer of steel products, forcing steel mills to curb output, while slower economic growth has already hurt demand for industrial metals.
"Iron ore prices are coming back to a rational range as fundamentals remain fragile. Steel mills are cutting output due to extreme tightness in cash flow and poor orders, so we see iron ore stocks at ports rise that will pressure the raw material," said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI gained 0.5 percent to $43.60 a tonne on Thursday, after falling earlier in the week to its lowest since The Steel Index compiled indices in 2008. Prices were on track for a 3 percent fall this week.
The most-traded rebar futures contract on the Shanghai Futures Exchange SRBcv1 dropped 2.1 percent to 1,656 yuan by close. The contract lost 2 percent this week.
Rebar and iron ore prices at 0706 GMT
Contract
Last
Change Pct Change
SHFE REBAR MAY6
1656
-35.00
-2.07
DALIAN IRON ORE DCE DCIO MAY6
302.5
-7.50
-2.42
SGX IRON ORE FUTURES DEC
42.43
-0.23
-0.54
THE STEEL INDEX 62 PCT INDEX
43.6
+0.20
+0.46
METAL BULLETIN INDEX
43.98
-0.09
-0.20
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3946 Chinese yuan)