* More production curbs in Tangshan to improve air quality
* Some mills replenishing iron ore stocks ahead of break - trader
* Citigroup (NYSE:C) raises 2016, 2017 iron ore price forecasts (Adds Citigroup forecasts, Port Hedland shipments, updates prices)
By Manolo Serapio Jr
MANILA, June 7 (Reuters) - Shanghai steel futures extended gains to hit a three-week high on Tuesday amid more short-term production curbs in a key Chinese city while iron ore prices rallied further as mills built stocks ahead of holidays later this week.
China's top steel-making city of Tangshan has ordered mills in and near the area to cut production from June 14-21 to ease air pollution, similar to an order it made in May. latest order supports hopes of tighter steel supply at a time of slack demand, said Richard Lu, analyst at CRU consultancy in Beijing. But he said the boost to prices should be fleeting.
"We still hold our view that there are no sustainable factors to support very high prices," said Lu.
Construction activity in China, the world's top steel consumer, typically slows down from June through August due to the scorching summer.
Rebar, or reinforcing steel used in construction, rose as far as 2,103 yuan ($320) a tonne on the Shanghai Futures Exchange SRBcv1 , its strongest since May 18, before paring gains to close at 2,077 yuan, up 2.3 percent.
Iron ore on the Dalian Commodity Exchange DCIOcv1 closed 3.5 percent higher at 369.50 yuan a tonne, after peaking at 374.50 yuan earlier, its highest since May 23.
The gains add to rebar's 4 percent spike and iron ore's 5.6 percent surge on Monday, helped by a broad-based rally in commodities that spread to China. Chinese steel producers are replenishing iron ore stockpiles ahead of public holidays in China on Thursday and Friday.
"Some mills are grabbing raw material before the holiday, most we saw are sourcing some port stock cargoes to meet short-term demand," said a Shanghai-based iron ore trader.
Stocks of imported iron ore at China's major ports stood at 100.25 million tonnes on June 3, down 400,000 tonnes from the prior week when it was at its highest since December 2014, according to consultancy SteelHome. SH-TOT-IRONINV
Iron ore shipments to China from Australia's Port Hedland, used by major miners BHP Billiton (LON:BLT) BHP.AX and Fortescue Metals Group FMG.AX , slipped to 31.7 million tonnes in May from 32.6 million tonnes in April. ore for immediate delivery to China's Tianjin port .IO62-CNI=SI climbed 2.2 percent to $50.60 a tonne on Monday, according to The Steel Index.
Citigroup raised its 2016 iron ore price forecast to $49 a tonne from $47, saying Chinese demand "may surprise to the upside thanks to broad-based credit easing and strong fixed asset investment." It increased its 2017 estimate to $42 from $39. ($1 = 6.5710 Chinese yuan)