UPDATE 1-China's March daily steel output at record, but set to slow

Tue Apr 15, 2014 11:47pm EDT

* March output rises 2.2 pct on year to 70.3 mln T

* Q1 output jumps 2.4 on year to 202.7 mln T

* Slowing economy may lead to output drop from June - analyst (Adds analyst's comments, details of data)

By Ruby Lian and Fayen Wong

SHANGHAI, April 16 (Reuters) - China's average daily crude steel output hit a record high 2.27 million tonnes in March, government data showed, as steelmakers ramped up on expectations of increased seasonal demand but a slowing economy may curb production in the months ahead.

Steel demand in the world's top producer and consumer traditionally improves in April and May as construction and manufacturing activities perk up after the New Year holiday, encouraging mills to raise production.

Mills are expected to further boost output in April, but probably only modestly, as a cooling economy could curb demand growth for metals this year.

China's March crude steel output trumped the previous record high 2.217 million tonnes hit in January and February. The monthly output stood at 70.25 million tonnes, up 2.2 percent from a year ago, data from the National Bureau of Statistics (NBS) showed on Wednesday. NBS didn't provide a separate monthly figure for the first two months.

"Steel output may continue going up slowly until May, but I do not rule out the possibility that it might fall on year from June," said Judy Zhu, an analyst with Standard Chartered Bank in Shanghai.

"Many mills are struggling with tight cash flow, with a few facing permanent shutdown threats, while Beijing has no intention to boost investment to drive up steel consumption. Meanwhile, Beijing will take tougher measures to crack down pollution, curbing steel production," Zhu said.

China's economy grew at its slowest pace in 18 months in the first quarter of 2014, with growth between January and March dropping to 7.4 percent from 7.7 percent in the previous three months.

Hopes of a major stimulus package from the central government to counter the slowdown were dashed by Premier Li Keqiang at an investment forum last week.

As part of Beijing's efforts to restructure its economy and push financial reforms, Beijing has vowed to tackle overcapacity in heavy industries by pledging tougher credit conditions and environmental protection measures.

Total steel output for the first quarter was 202.7 million tonnes, up 2.4 from the same period of last year, NBS data showed. Steel products output rose 5 percent to 95.07 million tonnes in March from a year ago, according to the data.

The rise in steel output was flagged last week by data showing a jump in imports of raw material iron ore. China's iron ore imports rebounded in March from a 13-month low hit the previous month, customs data had showed. (Editing by Muralikumar Anantharaman)

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