PREVIEW-Asia steel firms' Q2 profits to tumble; H2 seen better

* What: Major Asian steel mills' April-June earnings

* When: POSCO (July 13); Nippon (29); JFE (28)

* Results seen sharply lower on price cuts, weak demand

* H2 outlook improving on demand, price recovery

By Miyoung Kim

SEOUL, July 8 (Reuters) - The April-June quarter should prove to be the low point this year for Asia's big steel firms as a pick-up in orders from carmakers and builders boosts demand and prices, while lower input costs help many return to profit.

Hit by the industry's worst downturn in decades, Asia's steelmakers cut production by as much as 50 percent in the first half of this year, but are now cranking up output as stimulus packages drive demand and manufacturers replenish low stocks.

Japanese mills, led by Nippon Steel (5401.T) and JFE (5411.T), remain the biggest casualties of the downturn and are seen posting heavy losses in April-June, hit by price cuts and reduced demand from the autos industry, their main customer.

"We expect April-June to be the worst quarter of the year for earnings, as Japanese steel companies will have to book a large amount of one-time losses such as inventory write-off on top of already weak results," said Goldman Sachs analyst Rajeev Das.

"But the good news is that ... steel production has started to pick up. At least, it seems the worst is now over and that some firms may almost break even in Q2 (July-September)."

Asian steel prices have risen by around a tenth from April lows to nearly $500 a tonne. China, the world's No.1 steelmaker, is leading the recovery, helped by a near-$600 billion infrastructure focused stimulus package.

Improving demand and prices are helping Chinese mills return to profit: The China Iron and Steel Association said its 72 member mills made a combined profit of 1.3 billion yuan ($190 million) in May, ending seven straight monthly losses. [nPEK344502]

Baosteel (600019.SS), China's top steelmaker, raised domestic prices of its main products for July and plans to increase them again for August, brightening its earnings prospects for the rest of the year.[nSHA225095]

"Baosteel's earnings are expected to improve quarter by quarter for the rest of the year, and at an ever faster pace," said Helen Lau at Malaysia's OSK Securities in Hong Kong.

But the recent price recovery could prove fragile as steelmakers around the world raise output fast.