Iron ore futures inched higher on Thursday, buoyed by positive investor sentiment due to a recovering Chinese economy and low inventory data, though lower-than-expected steel output capped gains.

The most-traded January iron ore on China's Dalian Commodity Exchange DCIOcv1 rose 0.5% to 873 yuan ($119.33) per metric ton as of 0315 GMT, rising for the seventh consecutive session.

On the Singapore Exchange, the benchmark November iron ore SZZFU3 was up 0.8% at $116.75 a metric ton.

"Iron ore futures are rallying this morning purely in response to robust, upwardly revised Chinese Q3 GDP figures," said Atilla Widnell, Managing Director at Navigate Commodities.

China's economy grew at a faster-than-expected clip in the third quarter. Consumption and industrial activity in September also surprised on the upside, suggesting the recent flurry of policy measures is bolstering recovery.

The iron ore market also witnessed a sentiment boost from dwindling inventories, with iron ore stocks hitting a low of 105.2 million tons as of Oct. 13, marking their lowest levels since 2016, according to data from Steelhome SH-TOT-IRONINV, a consultancy firm.

We know from high-frequency daily downstream consumption data that this recovery has not eventuated in steel-intensive real estate or manufacturing industries, and would strongly warn about reading too much into these headline numbers, Atilla added.

In China, crude steel output fell 5% in September from August, confounding some market expectations for a rise after steelmakers had lifted utilisation rates amid the peak construction season.

Additionally, for the third straight month in September, dashing hopes of a turnaround in demand during a traditionally peak month for home buying.

Steel benchmarks on the Shanghai Futures Exchange were mostly down. The most-active rebar contract SRBcv1 slid 0.2%, hot-rolled coil SHHCcv1 dropped 0.2%, wire rod SWRcv1 fell 1.3%, while stainless steel SHSScv1 gained 0.3%.

Other steelmaking ingredients on the Dalian exchange also fell, with coking coal DJMcv1 and coke DCJcv1 down 1.8% and 1.7%, respectively.

Source: Reuters