* China’s daily steel output in March hit highest since Sept
* Production restrictions may be weaker than expected -analyst
* Tangshan carrying out pollution measures
BEIJING, April 17 (Reuters) - China’s iron ore futures recouped some losses after hitting a 10-month low on Tuesday as market sentiment was lifted by upbeat steel output data for March despite smog restrictions imposed by Beijing.
The world’s biggest steel maker last month churned out a total of 73.98 million tonnes of steel, up 4.5 percent from a year ago, data from the National Bureau of Statistics showed on Tuesday.
Average daily steel output in March reached 2.39 million tonnes, the highest level since September and up 2.8 percent from combined January-February data and also year-on-year, according to Reuters records.
The most-traded iron ore futures on the Dalian Commodity Exchange were down 0.6 percent at 443.5 yuan ($70.60) a tonne as of GMT 0325, bouncing back after dipping to their weakest level since June 27 at 434 yuan a tonne in early morning.
Despite concerns of a glut, construction steel rebar contracts for October delivery on the Shanghai Futures Exchange rose 0.6 percent to 3,423 yuan.
“Increase of steel output indicates production restrictions may be weaker than expected,” said Richard Lu, analyst at CRU consultancy in Beijing.
Tangshan has ordered steel mills to cut 50 percent of sintering capacity over and above the existing output restrictions in place until November as a bout of foul air was expected to blanket the country’s top steelmaking city and the surrounding Beijing-Tianjin-Hebei region from Monday.
Emergency measures in Tangshan are effective from April 15. It has not set a date for the measures to be lifted.
Other steel raw materials also rose after the release of official output data. The most-active coking coal futures recovered for the first time after a four-day loss, up 1.1 percent to 1,134 yuan a tonne, while coke contracts for September delivery gained 1.3 percent to 1,787 yuan a tonne. ($1 = 6.2822 Chinese yuan) (Reporting by Muyu Xu and Josephine Mason; Editing by Sunil Nair)