* Tangshan extended its summer production cuts by a month
* Higher steel prices support iron ore prices rally -trader
* Iron ore inventory fall to an eight-month low (Adds details, closing levels)
BEIJING, Sept 6 (Reuters) - Chinese coking coal futures rose their most in a month on Thursday, buoyed by firm physical prices as environmental inspections in major coal mining hubs of Shanxi and Shaanxi province increased concerns about falling output.
The coking coal contract for January delivery on the Dalian Commodity Exchange jumped as much as 4 percent to 1,286.5 yuan ($188.30) a tonne, before closing at 1,283.5 yuan, still up 3.7 percent.
Dalian’s most-active iron ore contract closed up 3.3 percent at 502.5 yuan per tonne, its highest since Aug. 21. Prices for the steel raw material remained strong even after China’s top steelmaking city extended output curbs on heavy industry for another month.
The city of Tangshan said on Wednesday it will continue to carry out anti-pollution measures in September by ordering steel mills, coke producers and power generators to shut part of their production.
The city had earlier imposed a six-week drive between July 20 and Aug. 31 to almost halve the production capacity on some sintering machines and blast furnaces.
“The rally on iron ore prices is supported by higher steel prices. The market is expected to see even fatter profit margins at mills amid stepped-up environmental measures. Therefore, steel mills would be willing to pay more for raw materials,” said a Shanghai-based iron ore trader.
The average profit margins at Chinese steel mills have been hovering at about 1,000 yuan a tonne over the past four months, according to Huatai Futures.
Stockpiles of the imported steelmaking ingredient iron ore at Chinese ports dropped to 149.2 million tonnes last week, the lowest level in eight months, data compiled by SteelHome showed.
“With falling inventory, traders are not in rush to sell iron ore at this moment,” said the Shanghai-based trader.
Coke prices rose 0.81 percent to close at 2,412 yuan a tonne.
Benchmark Shanghai rebar futures climbed 1.5 percent to 4,148 yuan a tonne.
$1 = 6.8370 yuan Reporting by Muyu Xu and Josephine Mason, Editing by Sherry Jacob-Phillips