SHANGHAI: China's daily crude steel output rose to a record 2.045 million tonnes in the first 10 days of May, data from the China Iron and Steel Association (CISA) showed on Friday, defying expectations that poor demand will force mills to pare output.

China's steel market is over supplied, as demand for the construction metal has stayed sluggish since late last year due to a year-long government clamp down on the property market and the cooling economic growth.

But steel mills, trying too maximize their profits despite a slower-than-expected seasonal recovery in demand, have increased output. China is the world's largest steel producer.

“Small steel mills are still able to make a tiny profit, and as far as I know, the majority of steel mills haven't put production cuts to their agenda yet,” said Hu Zhengwu, an analyst with industry consultancy Custeel.com.

Hu expects Chinese daily steel production to stand at around 2 million tonnes in May.

Chinese steelmakers have kept crude daily runs at record levels since March, but industry sources reckon the recent fall in rebar prices and slower consumption could trigger a cut in production by next month.

“I expect steel prices to stabilise a bit in the coming two weeks, but June will not be promising,” Hu added.

Benchmark rebar steel futures on the Shanghai Futures Exchange have fallen around 0.6 per cent, or over 200 yuan, since April.

Some mills have already started to postpone delivery of iron ore, as a slow steel market cuts demand for the raw material and producers expect a further drop in prices.

CISA estimates are based on the 80 or so medium and large-sized steel mills which produce around 80 per cent of China's total output.