UPDATE 3-China daily steel output drops, offers some respite to glut woes

* July output 2.15 mln tonnes a day - Reuters calculations

* Down from record 2.32 mln tonnes a day in June

* China clamps down on polluting steel mills, cuts capacity (Adds details on coal, crude oil production, economic activity)

Aug 12 (Reuters) - China’s average daily crude steel output fell in July from a record, government data showed on Friday, providing some respite to overseas rivals angered by a torrent of cheap steel from Chinese mills in the past year.

The decline partly reflects China’s efforts to address a chronic glut. Some analysts predict output may shrink further in the months ahead as more mills shut in a sector undergoing its most significant - and painful - restructuring in two decades.

The pullback was also due to softer domestic demand, particularly around July as construction typically drops during the summer lull.

Economic activity broadly slowed in July, with crude oil production sliding to its weakest level since October 2011 on a daily basis and coal output extending its slump.

In the months ahead, further capacity cuts, mostly via stricter environmental controls, could continue to shrink China’s steel output, said Richard Lu, analyst at CRU consultancy in Beijing.

“Market participants are all expecting the government will take stronger measures to close capacity for the rest of the year,” Lu said.

Daily steel output averaged 2.15 million tonnes last month after a surprise increase to an all-time high of 2.32 million tonnes in June, according to Reuters calculations based on data released by China’s National Bureau of Statistics.

The decline was in line with a 5.9 percent drop in Chinese steel exports in July, though shipments remain elevated and total shipments in January-to-July were up from a year earlier.

China has pledged to cut its steel capacity by around 45 million tonnes this year and by 140 million tonnes by 2020. Yet capacity reductions amounted to just 47 percent of China’s annual target by end-July, suggesting tougher measures ahead.

Some local governments have resisted Beijing’s call for cuts in order to protect jobs and their economies.

A speculation-induced spike in steel prices this year has also encouraged some Chinese producers to boost output for export to counter slower domestic demand. That has led to accusations from rival producers that China is selling into export markets at below cost, which the country has denied.

On Friday, the most-traded rebar, used in construction, rose 0.27 percent to 2,578 yuan ($389) a tonne on the Shanghai Futures Exchange after the output data. The contract hit 2,639 yuan on Wednesday, its highest since April 26.

For July, China’s steel production rose 2.6 percent from a year earlier to 66.81 million tonnes, bringing output in the first seven months of the year to 466.52 million tonnes, down 0.5 percent.

Output of steel products rose 4.9 pct to 95.94 million tonnes last month, and was up 1.9 pct over January-July to 657.05 million tonnes. ($1 = 6.6415 Chinese yuan) (Reporting by Manolo Serapio Jr.; Writing by Ryan Woo; Editing by Richard Pullin and Christian Schmollinger)