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UPDATE 1-China's iron ore wobbles on supply concerns, higher trade fees

* Dalian exchange volumes drop as transaction fees raised

* Iron ore supply seen at “critical levels” in major ports

* Iron ore drawdown “intensified” in recent weeks - analyst

* Iron ore inventory at Chinese ports at lowest since 2017 (Updates with details, closing prices, and graphic)

MANILA, May 30 (Reuters) - China’s iron ore futures swung from gains to losses on Thursday, with market participants worried about the dwindling supply at the country’s major ports, and cautious at the same time as regulators have sought to curb speculative trading.

The most-traded iron ore for September delivery on the Dalian Commodity Exchange (DCE) ended the session down 0.5% at 737 yuan ($106.73) a tonne, after rising as much as 1.2% in early trade.

The day’s trade volume, however, was 32% lower compared with Wednesday’s level, with the increase in transaction fees announced early this week by the DCE scheduled to take effect on Thursday.

Analysts and traders say the DCE move is aimed at reining in speculative buying and selling. Last week the bourse asked its members to trade “rationally” after noting large fluctuations in the futures prices of iron ore and coke.

However, while market participants were quick to cash in on gains and seem to have begun limiting their transactions, “iron ore prices will likely remain strong because of tight supply”, said a trader based in Beijing.

Supply of iron ore, a steel-making feedstock, at major trading ports in China such as Rizhao and Qingdao were “running at critical levels”, said Darren Toh, a data scientist with Singapore-based steel and iron ore data analytics company Tivlon Technologies.

“The drawdown on a week-by-week basis intensified over the last nine weeks,” he said.

With limited seaborne arrivals and while domestic demand remained brisk, iron ore stockpiles at Chinese ports have fallen to the lowest in more than two years, based on data compiled by SteelHome consultancy. SH-TOT-IRONINV

Spot iron ore with 62% iron content for delivery to China SH-CCN-IRNOR62 hovered near a five-year high at $106 a tonne on Wednesday, according to SteelHome.

Tivlon believes the worst is yet to come as the current tightness in supply is a result mainly of the continued drawdown from ports as steel makers ramped up production.

“What we are seeing right now is only the ramp-up in sintering operations,” Toh said, adding that the full impact of the disruption in supply from Brazil was yet to be seen.

China’s iron ore imports in April fell to the lowest level in 18 months as poor weather in Brazil, the country’s second-biggest supplier, disrupted shipments and some production by miner Vale SA was halted following a mine accident.

For the first four months of 2019, China - the world’s biggest steel producer - imported 340.21 million tonnes of iron ore, down 3.7% from 353.32 million tonnes in the same period last year.

Other steel-making raw materials were also volatile, with Dalian coking coal up 1.0% at 1,396.5 yuan a tonne, after two days of declines.

Coke erased early gains to end 0.7% lower at 2,205 yuan a tonne.

The most-active construction steel rebar contract on the Shanghai Futures Exchange was down 1.1% at 3,777 yuan a tonne. Hot rolled coil, used in cars and home appliances, edged down 0.5% to 3,640 yuan.

($1 = 6.9054 yuan)

Reporting by Enrico dela Cruz; Editing by Rashmi Aich and Sherry Jacob-Phillips