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UPDATE 1-Dalian iron ore plunges, reports second weekly drop on falling demand

(Adds details; updates with closing prices)

BEIJING, Aug 13 (Reuters) - Benchmark iron ore futures in China closed lower on Friday and logged a second straight weekly decline on sluggish demand for the steelmaking ingredient due to the government’s steel output controls.

The China Iron and Steel Association said in a statement this week mills that are more polluted or consume high energy should lower steel production. It also pledged to ensure that 2021 steel output will fall on an annual basis.

Capacity utilisation rates of blast furnaces at 247 mills across China recovered slightly to 85.89% this week, data from Mysteel consultancy showed, but still well below 95.16% the same period a year earlier.

The most-traded iron ore futures on the Dalian Commodity Exchange slumped as much as 4.2% to 814 yuan ($125.66) per tonne on Friday, before closing down 0.9% at 842 yuan per tonne. For the week, iron ore futures declined 8.2%.

Spot prices of iron ore with 62% iron content for delivery to China SH-CCN-IRNOR62 slipped $2 to $166 per tonne on Thursday, according to SteelHome consultancy.

Other steelmaking raw materials were mixed, with coking coal falling 2.7% to 2,185 yuan a tonne while coke futures inching 0.7% higher to 3,145 yuan a tonne.

FUNDAMENTALS

* Steel rebar on the Shanghai Futures Exchange slipped 0.9%% to 5,482 yuan a tonne at close, sending its weekly loss to 5.6%.

* Hot rolled coils, used in the manufacturing sector, slid 1.4% to 5,765 yuan per tonne. It dropped 6.5% this week.

* Shanghai stainless steel futures fell 1.6% to 18,240 yuan a tonne.

$1 = 6.4778 Chinese yuan renminbi Reporting by Min Zhang and Shivani Singh; Editing by Amy Caren Daniel and Rashmi Aich

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