* Dalian iron ore rises as much as 2.5% in morning trade
* Spot 62% iron ore down to $85.5 per tonne
* More cities in northern area issue smog alert
BEIJING, Oct 23 (Reuters) - Chinese steel futures rose for a second straight session on Wednesday as more cities in the northern part of the country issued pollution alerts, curbing production at mills.
Seven cities in the province of Shandong and some in Shanxi issued yellow or orange smog alerts this week on expectation of heavy pollution, following similar steps by the top steelmaking city Tangshan and the central province of Henan. most-active construction steel rebar contract on the Shanghai Futures Exchange SRBcv1 , for January 2020 delivery, rose 0.7% to 3,327 yuan ($469.63) a tonne as of 0229 GMT.
Futures for hot-rolled coil steel SHHCcv1 , used in cars and home appliances, also for January delivery, gained 0.7% to 3,324 yuan a tonne.
Steel inventories in China fell to 10.45 million tonnes in the week to Oct.17, the lowest since the week ended Jan. 25, according to data compiled by Mysteel consultancy.
FUNDAMENTALS
* The most actively traded iron ore futures contract on the Dalian Commodity Exchange DCIOcv1 , for January 2020 delivery, jumped 1.7% to 624 yuan a tonne.
* Stainless steel SHSSc1 , for February delivery, edged up 0.8% to 14,970 yuan a tonne.
* Other steelmaking ingredients also gained, with Dalian coking coal DJMcv1 for January delivery rising 1.5% to 1,255 yuan a tonne and coke DCJcv1 up 1.2% at 1,764 yuan.
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