* China's downstream steel demand remains firm - Marex Spectron
* Vale suspends rail freight line amid dam bursting risk (Updates closing prices)
BEIJING, May 21 (Reuters) - China's steel futures rose nearly 4% on Tuesday despite concerns over the escalating trade dispute with the United States, as investors expect stronger steel demand from the property market.
"Downstream steel demand (manufacturing and construction) remains firm, with the latest construction data reflecting improving construction activities," Hui Heng Tan, research analyst from Marex Spectron, said in a note.
Average new home prices in China's 70 major cities edged up 0.6% in April, while China's real estate investment surged 12% in April from a year earlier, official data showed.
"Steel inventory has not been seen piling up at traders and mills, indicating demand is still solid," a Shanghai-based trader said.
The Sino-U.S. trade war escalated after the U.S. Commerce Department last week added China's telecom giant Huawei and its 68 entities to an export blacklist that makes it nearly impossible for the Chinese company to purchase goods made in the United States.
Alphabet Inc's Google was reported to have suspended some business with Huawei after Trump's blacklist.
Benchmark Shanghai rebar prices rose 3.8% to 3,919 yuan ($566.98) a tonne, its highest since September 2011. Hot-rolled coil futures advanced 3.2% to 3,765 yuan.
Dalian iron ore futures climbed 1.3% on Tuesday to 717 yuan per tonne after rising to a record high in the previous session.
Prices were supported by reports of the potential collapse of a tailings dam at another Brazilian mine owned by Vale SA, raising concerns that more ore supply from Vale mines may be shut to address safety issues.
The company said on Tuesday it has suspended the transport of freight on the Belo Horizonte branch line between Sabara and Barao de Cocais, a line operating in the vicinity of the Congo Soco mine pit, where the tailings mine has a 15% chance of rupturing.
Dalian coking coal edged up 0.9% to 1,403.5 yuan a tonne, while coke contract rose 5.9% to a eight-month high of 2,217 yuan a tonne, buoyed by strong physical prices.
Coke plants in major steelmaking regions such as Hebei and Shandong province have hiked physical coke prices by 100 yuan a tonne, said three traders who participate in the market. ($1 = 6.9120 Chinese yuan renminbi) (Reporting by Muyu Xu and Shivani Singh; Editing by James Emmanuel and Christian Schmollinger)