* Rebar reached strongest level since March 8
* Jiangsu Shagang raised spot prices by 130 yuan
* Shaanxi to curb coal-chemical, coking capacity by 20pct
BEIJING, May 2 (Reuters) - China’s steel rebar futures rose to the highest level in two months on Wednesday, buoyed by a firm physical market that helped run down inventories amid ongoing supply constraints.
The most-active rebar contract for October delivery on the Shanghai Futures Exchange jumped 2.8 percent to 3,675 yuan ($578.26) a tonne as of GMT 0230, having touched its strongest level since March 8 at 3,687 yuan a tonne.
Jiangsu Shagang Group, China’s biggest private-owned steel firm by production capacity, said on Tuesday it will hike spot prices for rebar in May by 130 yuan a tonne to 4,070 yuan.
Activity in China’s steel industry continued to grow in April, with the Purchasing Managers’ Index (PMI) for the industry rising 1.1 percentage points to 51.7 percent from the prior month, according to data from the China Federation of Logistics & Purchasing (CFLP) on Monday.
“Demand for steel products remains at a high level, while supplies have been curbed due to environmental policies, which helps to lift market prices,” said analysts at Orient Futures in a note.
Stockpiles of rebar held by Chinese traders decreased further last week after hitting a five-year peak in mid March. Inventory of 7.13 million tonnes as of Sunday was down 7.4 percent from a week ago, data compiled by SteelHome consultancy showed. SH-TOT-RBARINV
Prices for raw materials also rose alongside rebar.
The most-active iron ore futures on the Dalian Commodity Exchange edged up 0.2 percent to 464.5 yuan a tonne.
Coking coal prices picked up 0.9 percent to 1,172 yuan while coke futures rose 1.2 percent to 1,932 yuan.
Cities in the eastern province Jiangsu currently face rigorous environmental checks, while Shaanxi, the No.3 coal producing province in western China, said over the weekend it aims to cut PM2.5 concentration by 15 percent from its 2015 level by 2020.
To reach the target, Shaanxi plans to target its heavy industries by accelerating coal-to-gas conversion before winter and curbing around 20 percent of output capacity in petrochemical, coal-chemical and coking industries during summer.
$1 = 6.3553 Chinese yuan renminbi Reporting by Muyu Xu and Josephine Mason; editing by Richard Pullin