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China coke futures set for best week in nearly 2 years as supply tightens

* Chinese coke benchmark sets longest rally in nine months

* Dalian iron ore rises, but capped gains in volatile week

* China 2020 stainless steel output forecast to rise 2.1%

MANILA, Nov 6 (Reuters) - Chinese coke futures extended gains for a sixth consecutive session on Friday, its longest rally in nine months, with the benchmark contract set to mark its biggest weekly gain since December 2018 underpinned by tight domestic supply.

The steelmaking material for January 2021 delivery rose as much as 3.2% to 2,415 yuan ($364.75) a tonne on China’s Dalian Commodity Exchange, a fresh high for the most-active contract.

The benchmark has risen more than 10% so far from last week, outpacing Dalian iron ore’s 0.4% weekly gain.

“The current tight coke supply and demand situation has intensified,” analysts at Sinosteel Futures in Beijing wrote in a note.

Several coke-producing provinces in China are eliminating inefficient plants, reducing supply of the processed form of coking or metallurgical coal, while demand for the material remained brisk among steel producers.

“The apparent consumption of steel has rebounded recently, and the destocking has been more obvious, which has driven the price of steel to rise,” Sinosteel analysts said.

As steel prices rose while iron ore prices eased from record peaks touched in September, they said margins of steel blast furnaces also improved, keeping demand for coke strong.

FUNDAMENTALS

* Iron ore futures rose but capped gains in a volatile week amid signs of weaker demand and rising supply in China, with the most-traded Dalian contract up 0.7% by 0238 GMT, while the Singapore Exchange benchmark gained 0.9%.

* Spot iron ore prices have been generally stable this week, trading at $118.50 a tonne on Thursday based on SteelHome consultancy data. SH-CCN-IRNOR62

* Construction steel rebar on the Shanghai Futures Exchange rose 0.5% while hot-rolled coil climbed 0.4% and stainless steel gained 0.3%.

* China’s stainless steel production is forecast to rise by 2.1% this year to more than 30 million tonnes amid robust demand.

Reporting by Enrico Dela Cruz; Editing by Krishna Chandra Eluri

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