Shanghai steel rebar rises for third day on falling inventory

* China steel inventory falls for 6th week, hits 2-yr low -Mysteel

* Prices remain under pressure from increasing output -analysts

* Northern China has started to enforce winter production cuts

BEIJING, Nov 16 (Reuters) – Prices of Chinese steel rebar rose for a third session on Friday, with falling stockpiles suggesting firm demand for the construction material.

Steel product inventory at Chinese traders dropped for a sixth straight week in the week to Nov. 16, down 284,700 tonnes from the previous week at 8.61 million tonnes, according to data compiled by Mysteel consultancy. That marked the lowest level since late November 2016.

Stocks of construction steel rebar declined 5.6 percent to 3.17 million tonnes, the data showed, while hot-rolled coil dwindled 4.6 percent to 2.14 million tonnes.

Benchmark Shanghai rebar prices had climbed 0.5 percent to 3,919 yuan ($565.23) a tonne by 0150 GMT. The hot-rolled coil contract rose 0.9 percent to 3,634 yuan.

However, analysts warned that increasing output would put downward pressure on steel prices.

“Spot trade is becoming lukewarm as investors expect falling prices with mounting production at steel mills,” analysts from Sinosteel Futures said in a note.

The weekly utilisation rate at steel mills across the country continued to increase this week, climbing by 0.14 percentage points to 67.82 percent as of Friday, Mysteel data showed, with some big furnaces resuming operations after regular maintenance.

Cities in northern China, including steelmaking hubs Tangshan and Handan in Hebei province, have started to implement four-month-long winter production restrictions from Thursday.

Analysts estimated that around 74 percent of steel mills in Tangshan had crimped their operations, with more following the regulations in the coming days.

Steelmaking raw ingredients also rose along with rebar prices.

The most-traded Dalian coking coal futures, for January delivery, climbed 2.1 percent to 1,390 yuan a tonne, while coke prices advanced as much as 3.3 percent to 2,429 yuan.

The utilisation rate at coke plants has fallen by 1.6 percentage points to 77.02 percent this week from a week ago, Mysteel data showed, dampened by production restrictions in top coal mining province Shanxi.

Dalian iron ore futures rose 2.1 percent to 521 yuan a tonne.