* China May official factory PMI at 51.9, above expectations
* Coking coal jumps more than 2 pct
* But U.S.-China trade tensions keep price gains in check (Updates prices)
By Manolo Serapio Jr
MANILA, May 31 (Reuters) - Chinese steel futures climbed to a two-week high on Thursday, spurred by a survey showing that the manufacturing sector in the world’s No. 2 economy grew at the quickest pace in eight months in May.
The official Purchasing Managers’ Index rose to 51.9 in May, from 51.4 in April, topping economists’ expectations for a dip to 51.3.
The latest Chinese number “suggests manufacturing remains resilient and domestic growth is chugging along. And amid trade and tariff tensions, this should be interpreted positively,” said Stephen Innes, head of trading for Asia Pacific at futures brokerage OANDA in Singapore.
The most actively traded rebar for October delivery on the Shanghai Futures Exchange closed up 1.5 percent at 3,696 yuan ($577) a tonne, just off the day’s peak of 3,697 yuan, its strongest since May 18.
China’s firm economy bodes well for steel demand in the world’s biggest consumer, and consumption has been strong in the past months as evidenced by a sustained fall in steel inventories at traders.
Standing at 5.65 million tonnes last week, stocks of construction steel product rebar have dropped 42 percent from a five-year high in mid-March, based on data tracked by SteelHome consultancy. SH-TOT-RBARINV
But Innes said the positive impact of China’s upbeat manufacturing data on risky assets could be fleeting amid continuing trade tensions between Washington and Beijing.
“The gnawing concern is that risk sentiment could turn on a dime and by no means does this data suggest we’re shielded from the geopolitical firing line just yet,” Innes said in a note.
“Way too much risk in the markets and far too early in the session to start jumping for joy on the solid China data prints.”
Beijing lashed out on Wednesday at renewed threats from the White House on imposing tariffs on $50 billion of imports from China, warning that it was ready to fight back if Washington was looking for a trade war.
Outside of China, the United States will announce plans to impose tariffs on steel and aluminium imports from the European Union as early as Thursday.
Iron ore on the Dalian Commodity Exchange ended 0.4 percent higher at 462.50 yuan a tonne, coking coal jumped 2.4 percent to 1,238.50 yuan and coke rose 1.7 percent to 2,084.50 yuan.
Spot iron ore for delivery to China’s Qingdao port .IO62-CNO=MB climbed 3 percent to $65.78 a tonne on Wednesday, according to Metal Bulletin. ($1 = 6.4025 Chinese yuan) (Reporting by Manolo Serapio Jr.; editing by Richard Pullin and Gopakumar Warrier)