* China March factory activity grew for first time in 4 months
* Rio Tinto cut 2019 outlook for iron ore shipments
* Utilisation rates climbed to 63.64 percent - Mysteel
* China to launch inspections on illegal capacity in 2019 (Updates closing prices)
BEIJING, April 1 (Reuters) - China’s iron ore futures hit a 7-week-high on Monday after recording its best quarter in nine, buoyed by strong economic data and tight supply concerns after Rio Tinto cuts its 2019 output for iron ore shipments.
The most-active iron ore contract for May delivery on the Dalian Commodity Exchange soared as much as 5.2 percent to 653.5 yuan ($97.40) a tonne, its highest since mid-February, before closing at 650 yuan.
An official survey showed on Sunday factory activity in China unexpectedly grew for the first time in four months in March, suggesting government stimulus measures may be starting to take hold in the country.
The improvement in business conditions was partly driven by increasing factory output, which posted its fastest pace in six months, and growing new orders.
Firm iron ore prices also came as the world’s No.2 iron ore miner, Rio Tinto, cut its 2019 outlook for iron ore shipments from Australia’s Pilbara region due to tropical cyclone.
That has further fuelled supply concerns after it issued force majeure notices to some iron ore customers last week.
“We expect iron ore arrivals to fall sharply in early April due to bad weather...Iron ore prices are expected to stay firm as steel mills start to replenish their inventory alongside the resuming operations,” said analysts from CITIC Futures in a note in Mandarin.
Industrial plants in northern China have restarted some production after six months of environmental restrictions.
Utilisation rates at steel mills across China climbed for a second week last week as of March 29 to 63.64 percent, according to data tracked by Mysteel consultancy.
However, government officials and industrial experts in China are calling on mills to restrain output, as the flooding of products in the market severely dents profit margins in the sector.
An official from industrial ministry said on Saturday there will inspections across China in 2019 to ensure that factories aren’t re-starting closed capacity and no new capacity is being launched without approvals.
Benchmark construction steel rebar prices on the Shanghai Futures Exchange gained 2.1 percent to 3,806 yuan a tonne.
Hot-rolled coil futures climbed 1.9 percent to 3,778 yuan a tonne.
Expectation of resuming operations at mills also lift prices of other steel-making ingredients.
Dalian coking coal rose 1.5 percent to 1,248.5 yuan a tonne, while coke advanced 2.1 percent to 2,017 yuan.
$1 = 6.7096 Chinese yuan Reporting by Muyu Xu and Tom Daly; Editing by Rashmi Aich and Subhranshu Sahu