UPDATE 1-China iron ore bounces off 7-month low as steel recovers

* Shanghai rebar climbs 3 pct in choppy trade

* Iron ore stocks at China ports highest since 2004

* Spot iron ore hits lowest level in a year (Adds China data, updates prices)

MANILA, June 14 (Reuters) - China’s iron ore futures bounced back from a seven-month low on Wednesday, tracking a recovery in steel prices, although concerns over surplus supply kept gains in check.

The rebound may help stabilise spot iron ore prices that hit their lowest level in a year this week.

China’s steel output rose 1.8 percent in May from a year earlier, government data showed, near April’s record level as mills ramped up production amid robust margins.

The most-traded iron ore contract for September delivery on the Dalian Commodity Exchange closed up 1.2 percent at 432 yuan ($64) a tonne, after falling as far as 412.50 yuan, the lowest since Nov. 21.

But rising supply of the steelmaking commodity in China remains a concern for market participants, limiting any price gains.

Stockpiles of imported iron ore at China's ports reached 140.05 million tonnes on June 9, the most since 2004, according to data tracked by SteelHome consultancy. SH-TOT-IRONINV

“Rising seaborne supply and high port stockpiles continue to weigh on prices,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note.

“Demand has also weakened as Chinese steel mills look to use more scrap steel in their blast furnaces,” said Dhar, adding that scrap steel prices have fallen sharply following Beijing’s crackdown on induction furnaces.

China has vowed to shut by the end of June all producers of highly polluting low-quality steel that use induction furnaces which consume steel scrap as raw material.

Iron ore for delivery to China's Qingdao port .IO62-CNO=MB fell 2.8 percent to $53.36 a tonne on Tuesday, the lowest since June last year, according to Metal Bulletin.

Iron ore has lost nearly a third of its value this year, underperforming other commodities such as nickel and oil .

The most-active rebar on the Shanghai Futures Exchange climbed 3 percent to end at 3,084 yuan per tonne after falling as much as 2 percent intraday.

China produced 72.26 million tonnes of crude steel last month, not far below April’s all-time high of 72.78 million tonnes.

Data also released on Wednesday showed China’s economy generally remained on solid footing in May with industrial output growing at a steady 6.5 percent pace. ($1 = 6.7973 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Joseph Radford and Vyas Mohan)