* Steel, iron ore futures drop amid futures probe worries
* Outlook firm on capacity cuts, demand recovery
* Coking coal, coke surge on short supplies
SHANGHAI, March 1 (Reuters) - Chinese steel and iron ore futures extended losses on Wednesday amid worries the country’s top economic planner was investigating the recent surge in futures markets.
China’s National Development and Reform Commission (NDRC) last month questioned futures brokers on whether speculation has distorted commodity futures prices, Bloomberg reported this week, citing people with knowledge of the matter.
But government efforts to cut capacity and seasonal recovery in demand kept spot prices firm.
The world’s top steel producer has determined to slash capacity in coming years in an effort to restructure the economy and reduce pollution. The latest moves include a series of crackdowns on low-quality rebar production in some regions including the eastern provinces of Jiangsu and Shandong.
“Steelmakers have low inventories of steel products and so are raising production driven by high profits, and the government’s shutdown of some low-end capacity will continue supporting the market,” said Bai Jing, an analyst with Galaxy Futures in Beijing.
Bai added that steel demand is improving seasonally as construction activity picked up, with mills making profits as high as 700 yuan ($101.85) a tonne.
The most active rebar on the Shanghai Futures Exchange fell in the second session on Wednesday, down 1.2 percent at 3,522 yuan by 0210 GMT.
Iron ore on the Dalian Commodity Exchange had dropped 1.2 percent to 696.5 yuan a tonne by 0210 GMT.
On the Dalian Commodity Exchange, cokig coal surged more than 4 percent to 1,311 yuan a tonne and coke futures jumped nearly 4 percent to 1,794 yuan a tonne, due to short supplies of the two major steelmaking ingredients. ($1 = 6.8731 Chinese yuan renminbi) (Reporting by Ruby Lian and Josephine Mason; Editing by Joseph Radford)