* Falling steel inventories underline firm demand
* Glut weighs on iron ore as China port stocks near record high
By Manolo Serapio Jr
MANILA, April 26 (Reuters) - Chinese steel futures traded near a seven-week high on Thursday as construction demand in the world’s top steel user gets well underway.
Reflecting firm demand, Chinese traders’ stockpiles of construction steel product rebar have fallen 21 percent from a five-year high in mid-March to 7.69 million tonnes on April 20, data compiled by SteelHome consultancy showed. SH-TOT-RBARINV
The sustained decline in inventories shows seasonal construction demand had been picking up, although later than usual given that China’s annual parliament meeting last month followed the Lunar New Year break in February, said Helen Lau, analyst at Argonaut Securities in Hong Kong.
“Later is better than never,” she said.
The most-active October rebar contract on the Shanghai Futures Exchange hit 3,613 yuan ($571) a tonne, its loftiest since March 8, before easing 0.3 percent to 3,557 yuan by 0232 GMT.
Lau said escalating trade tensions between China and the United States may also prompt Beijing to take action to cushion any impact on its domestic economy, which should bode well for steel.
“I think China will be ready to provide stimulus to protect the domestic economy which will be supportive to steel demand assuming things will deteriorate between the U.S. and China,” she said.
The most-traded September iron ore on the Dalian Commodity Exchange fell 1 percent to 466 yuan a tonne, slipping for a second session in a row, after a five-day rally that pushed the raw material to a one-month peak on Monday.
While iron ore prices should typically benefit from a firmer steel market, Lau said the commodity is under pressure “because so much iron ore is being produced for supply to China and inventory is still very high.”
Iron ore stocked at China’s ports stood at 159.78 million tonnes on April 20, not far below a record high of 161.68 million tonnes at the end of March, SteelHome data showed. SH-TOT-IRONINV
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB dropped 1.3 percent to $66.38 a tonne on Wednesday, the weakest since April 18, according to Metal Bulletin. ($1 = 6.3236 Chinese yuan) (Reporting by Manolo Serapio Jr.; editing by Richard Pullin)