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UPDATE 2-China's iron ore climbs, posts 3rd weekly gain as demand rises

* Dalian iron ore rises 3.7 pct this week

* Construction steel rebar marks best week since Dec

* China ramps up steel output, boosting iron ore demand

* China’s Q1 iron ore imports down 3.5 pct y/y (Updates with official March iron ore imports figure in paragraph 2)

MANILA, April 12 (Reuters) - Iron ore futures in China ended higher on Friday and posted their third consecutive weekly gain, as spot prices hovered near five-year highs amid increased demand from Chinese steelmakers and declining supplies from producers overseas.

China’s iron ore imports rose in March to 86.42 million tonnes, after touching a 10-month-low in February, according to the latest customs data, as steel mills replenished their inventory before winter output restrictions ended in April.

The country’s purchases of the steelmaking raw material totalled 83.08 million tonnes in February and 85.79 million tonnes in March last year.

For the first quarter of 2019, China brought in 261 million tonnes of iron ore, down 3.5 percent from 270.4 million tonnes in the same period a year ago.

The most traded September 2019 iron ore contract on the Dalian Commodity Exchange closed 0.7 percent higher at 653.5 yuan ($97.30) a tonne and gained 3.7 percent this week.

Steel mills’ strong appetite for iron ore at a time the market is spooked by supply disruptions lifted China’s benchmark contract earlier this week to the highest since 2013, when the world’s biggest steelmaker launched its futures market for the commodity.

Dalian iron ore has risen about 49 percent this year, driven mainly by worries over supply as shipments to China by top suppliers in Brazil and Australia decline.

The global iron ore market is facing a shortfall of around 34 million tonnes this year, according to Westpac Banking Corp.

The deficit was unseen before a fatal tailings dam collapse in January curtailed the operations of the world’s No. 1 iron ore miner Vale SA in Brazil.

Adding to concerns about the shortfall, a tropical cyclone in late March hit the operations of major iron ore producers in Australia, prompting them to lower their 2019 shipment estimates.

“Given that spot prices have exceeded our expectations to date, and the supply hit from Vale mine closures are larger than initially expected, our forecasts for iron ore have been revised,” Westpac said in a note.

Spot iron ore with 62 percent iron content is now likely to end the June quarter at $87 a tonne and 2019 at $77, versus the previous forecasts of $85 and $75, respectively, it said.

The price for the 62 percent grade stood at $94.50 a tonne on Thursday SH-CCN-IRNOR62, according to SteelHome consultancy.

Steel prices edged higher with the benchmark construction-used rebar on the Shanghai Futures Exchange up 0.6 percent at 3,794 yuan a tonne, rising about 6 percent this week to mark its biggest weekly jump since the first week of December 2018.

Hot rolled coil, used for cars and home appliances, inched up 0.4 percent to 3,693 yuan a tonne.

Other steelmaking raw materials rebounded in afternoon trade from early losses, with coking coal up 0.3 percent at 1,317.5 yuan a tonne while coke gained 1.3 percent to 2,031 yuan.

($1 = 6.7163 Chinese yuan)

Reporting by Enrico dela Cruz; Editing by Rashmi Aich and Subhranshu Sahu