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UPDATE 1-China iron ore futures rise to two-week high, steel drops further

* Iron ore extends rally into 4th session

* Tangshan reportedly allowing mills to resume sintering

* Rebar posts first weekly loss in 4 wks, second in 2019

* Chinese premier vows to support slowing economy (Updates with closing prices)

MANILA, March 15 (Reuters) - Iron ore prices in China rose on Friday, with the benchmark futures contract extending a modest rally to close at the highest in two weeks, after some steel mills were reportedly allowed to resume sintering operations.

But steel futures dropped further, with steel rebar falling 0.6 percent for the week, the first weekly decline in four weeks, as concerns persist over a weak demand outlook amid high Chinese output.

The May 2019 iron ore contract, the most active on the Dalian Commodity Exchange, rose 1.5 percent to 627 yuan ($93.32) a tonne.

Spot iron ore for delivery to China SH-CCN-IRNOR62, with 62 percent iron content, rose for a second day on Thursday to $87 a tonne from $85.50 the day before, according to SteelHome consultancy.

“The Chinese steel hub of Tangshan removed emergency restrictions on sinter plants, which had been in place since the start of the month,” ANZ said.

Sintering is a process where raw iron ore is heated and compressed into larger mass before smelting into steel.

Tangshan had last week extended a level 1 smog alert that was due to be lifted on March 6 due to unfavourable weather. That level is the highest in China’s four-tier pollution warning system.

Under such alert level, steel mills are required to curb output by 40 percent to 70 percent or even stop production, depending on the scale of their emissions.

Coking coal futures were also higher, with the benchmark contract up 0.4 percent at 1,237 yuan a tonne. But coke edged down 0.3 percent to 1,994 yuan.

The most-active rebar contract, also expiring in May, on the Shanghai Futures Exchange dropped 0.8 percent to 3,763 yuan a tonne. Hot rolled coil fell 1.4 percent to 3,673 yuan.

While near-term steel demand in China is expected to pick up as construction activity resumes after winter, the overall outlook is uncertain as the latest data suggests weakness in the world’s second-biggest economy.

“Investors continue to fret about Chinese demand,” ANZ said in a note.

Average daily steel output in China in January and February reached 2.54 million tonnes, up from 2.46 million tonnes in December and 2.32 million tonnes in the same months last year, according to Reuters calculations based on official data.

Data on Thursday also showed growth in China’s industrial output fell to a 17-year low in the first two months of the year and the jobless rate rose, but property investment picked up.

Premier Li Keqiang, speaking at his annual news conference on Friday, said China’s economy is facing additional downward pressure but Beijing will not let economic growth slip out of a reasonable range.

($1 = 6.7190 Chinese yuan)

Reporting by Enrico dela Cruz; Editing by Joseph Radford and Christian Schmollinger