SHANGHAI, July 13 (Reuters) - China's average daily crude steel output hit 2.007 million tonnes in June, its second highest on record, as steel mills shrugged off slowing economic growth in the world's top steel-producing country in order to maximise market share.
Sluggish economic growth in China hurt steel demand throughout the first half of this year, but steel mills have kept utilisation rates high throughout June in a bid to maintain their thin profits.
"Steelmakers saw marginally improved profits in June as they used cheaper iron ore purchased in May," said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.
Spot prices of iron ore .IO62-CNI=SI, the key steelmaking ingredient, slumped 11 percent in May to hit their lowest on May 23 since November 8, 2011, before rebounding slightly to below $140 per tonne in June.
However, Chinese steel mills will slow run rates in July and August due to a pickup in iron ore cost and tepid demand in summer months, but the huge capacity is likely to limit the downside room.
"Demand will remain sluggish in July and August, and steel mills will cut output, but marginally, as the overcapacity will curb any significant decline in steel production," Liu added.
China's economy grew 7.6 percent in the second quarter of 2012 from a year earlier, its slowest pace in three years, confirming expectations of a downward trajectory that leaves full-year growth on course for its softest showing since 1999.
China produced 60.21 million tonnes of crude steel in June, up 0.6 percent from a year earlier, down from 61.23 million tonnes in May, data from the National Bureau of Statistics showed on Friday. It produced an unexpected record 2.019 million tonnes per day in April.
Steel output for the first six months rose 1.8 percent to 357.2 million tonnes from the same period last year, data showed.
Some analysts expect daily steel output will stay between 1.9 million and 2.0 million tonnes over the next few months.
China's biggest listed steelmaker, Baoshan Iron & Steel , will cut August prices of its main products by 4.6 percent to 5.6 percent, suggesting the company lacks confidence in the market near-term.
Finished steel products output rose 6.7 percent to 84.47 million tonnes from a year ago, and the total for the first half rose 6.1 percent to 467.44 million tonnes.