* Tangshan eases production curbs - trader
* Dalian iron ore scales fresh record high
* Spot 62% iron ore trades above $120/T (Updates with comments, details, closing prices, and graphic)
By Enrico Dela Cruz
MANILA, July 3 (Reuters) - Chinese steel futures fell on Wednesday as production restrictions have been eased in some steelmaking hubs, raising concerns that overall output will remain brisk and providing extra support to record-high iron ore prices.
The most-active October rebar contract on the Shanghai Futures Exchange dropped 0.8% to 4,030 yuan ($585.40) a tonne, pulling away from a more than eight-year peak hit on Monday.
The construction steel benchmark had staged a nine-session rally ending on Monday, buoyed by increased demand, falling stocks and output curbs in highly polluted industrial hubs in China.
Tangshan, the steel hub of China, imposed last month a set of output restrictions on producers, which will remain in place until August 1.
“The policy declared in Tangshan turned out to be not as strict as we heard last month,” said a Shanghai-based steel trader, echoing a report by an industry website, which Reuters could not immediately verify.
“That means some mills don’t need to cut so much production this month,” the trader said. “They may be allowed to continue to produce during certain times, and this will increase supply of steel.
Hot-rolled coil, used in cars and home appliances, dipped 0.5% to 3,910 yuan a tonne.
Less strict curbs on steel output could boost demand for iron ore.
“Iron ore futures are rising because of a mix of strong fundamentals and speculative trading,” the trader said.
The most-active September iron ore contract on the Dalian Commodity Exchange rose as much as 2.8% to 911.5 yuan a tonne, the highest since the benchmark’s launch in 2013. It closed 2.5% firmer at 908.5 yuan.
In a span of six months, Dalian iron ore’s value has more than doubled as port stocks across China shrank to their lowest since early 2017 due to reduced shipments from top exporters Australia and Brazil, as well as robust demand. SH-TOT-IRONINV
Supply from Brazil dropped due to mine shutdowns by top iron ore producer VALE SA for safety checks in the wake of a deadly tailings dam collapse in January.
A Brazilian Senate committee investigating the disaster recommended on Tuesday that Congress pass a blanket ban on all tailings dams, with those already in place be decomissioned in 10 years.
“I’m not sure how long this rally could last, but at present the steel mills are definitely under pressure with profit margins squeezed because of higher input prices,” the trader said.
Dalian coking coal fell 1.9% to 1,374 yuan a tonne, while coke was little changed at 2,102 yuan.
Benchmark spot iron ore for delivery to China SH-CCN-IRNOR62 was at a five-year high $123.50 a tonne on Tuesday, data tracked by SteelHome consultancy showed.
Shanghai steel futures surged nearly 30% this year, largely on expectations of increased demand from China’s stimulus measures to support its economy amid a bruising trade war with the United States.
“We are not sure how much room the current iron ore/steel rally has to run considering the overall slowdown in China’s economy and construction demand ... (during) summer months,” said Edward Meir, a consultant to INTL FCStone Financial in London.
“We would, therefore, not jump on the bullish bandwagon on either market at this point, tempting as it may be,” he said in his latest monthly market outlook.
($1 = 6.8842 yuan)
Reporting by Enrico dela Cruz; Editing by Gopakumar Warrier and Sherry Jacob-Phillips