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* High supply of both steel and iron ore in China
* Shanghai rebar down for third week of four
* Spot iron ore headed for second weekly gain
By Manolo Serapio Jr
MANILA, June 23 (Reuters) - Chinese iron ore futures dropped for a third day in four on Friday, tracking losses in steel prices, with both commodities flush with supply at a time when consumption is seasonally weak.
Hot weather and rains in China typically slow down construction activity during summer, limiting the demand for steel.
The most-active iron ore on the Dalian Commodity Exchange was down 1.2 percent at 428 yuan a tonne, as of 0216 GMT. It was down slightly for the week.
On the Shanghai Futures Exchange, the most-traded rebar slipped 1.3 percent to 3,047 yuan per tonne. The construction steel product has lost more than 2 percent so far this week, its third such loss in four weeks.
China produced 72.26 million tonnes of crude steel in May, not far below a record 72.78 million tonnes in the previous month. Analysts say output could remain high this month which could keep prices under pressure.
In terms of iron ore, supply remains plentiful, with stocks of the steelmaking raw material at Chinese ports near their highest level in 13 years.
Inventory of imported iron ore at the ports stood at 138.95 million tonnes last week, according to data tracked by SteelHome. The stockpiles reached 140.05 million tonnes the week before, the most since 2004.
Spot iron ore prices managed marginal gains this week, with the benchmark hitting near $57 a tonne, its highest in two-and-a-half weeks.
CMC Markets analyst Ric Spooner said the recent improvement in spot iron ore prices is a "minor relief."
"However, it would take a break above chart resistance at around $60 to indicate markets were having a major rethink on the threat posed by forecast supply increases," he said in a note.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB slipped 0.5 percent to $56.53 a tonne on Thursday, according to Metal Bulletin. It has gained 1.4 percent so far this week, on track for its second weekly increase. (Reporting by Manolo Serapio Jr.; Editing by Sherry Jacob-Phillips)