Reuters quoted China’s steel association as saying that steel output in China, will stay strong in the second half of this year as investment in infrastructure and social housing underpins demand.

The China Iron & Steel Association said in its monthly market report "China will continue to maintain high fixed asset investment for the remainder of the year with water conservation and social housing construction coming on top which will boost steel demand."

Despite government credit curbs and falling exports weighing on an already oversupplied sector, China crude steel production is expected to post increasingly higher YoY growth over the remainder of the year.

Data from CISA earlier this week showed that daily output of crude steel from Chinese mills fell 3.1% in the first 10 days of July to 1.955 million tonnes, but analysts expect the decline will be limited with producers of construction steel running close to full capacity.

China steel firms have been turning out more than 1.9 million tonnes a day since February from around 1.7 million tonnes last year. China steel production may maintain its breakneck pace in the second half of 2011 as a construction boom buoys demand putting it on track for another record year despite the credit curbs.

Steel output in China amounted to 350.5 million tonnes of crude steel from January to June up by 9.6%YoY.

CISA said "Long steel products will benefit from affordable housing and rural water conservation projects while flat steel products may face a worsening supply glut."

In the 26 major cities monitored by CISA, total inventories of five main steel products rebar, wire rod, hot rolled coil, cold rolled coil and plate fell 290,000 tonnes to 14.32 million tonnes in June from the previous month the fourth consecutive monthly fall.

(Sourced from Reuters)