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Steel

UPDATE 1-China steel rally unsustainable as production rises - CISA

* China’s move to support the economy will underpin steel demand

* Rising anti-dumping duties against China seen hurting exports

* China steel output expected to rise further in April and May (Adds CISA comments, background)

SHANGHAI, April 19 (Reuters) - The recent rally in steel prices in China will be unsustainable, given rising output from steel mills in the world’s biggest producer and consumer of the alloy, the China Iron & Steel Association (CISA) said on Tuesday.

While government measures to boost the economy will underpin local steel demand, exports will come under pressure due to rising protectionism from Southeast Asia and European countries against cheap supplies from China, leading to a product build up at home and lower prices, CISA cautioned in its monthly report.

Chinese steel prices have jumped almost 42 percent so far in 2016, following six straight annual falls, fuelled by tighter supply due to shutdowns in the past year and a pickup in construction activity after Lunar New Year in February.

“The big rise in steel prices has led to a rapid reopening of capacity that had been shut or suspended ... a large rise in steel output will not be good for the gap between market demand and supply,” CISA said.

Already a huge surplus has forced China to aggressively ship out steel, with exports hitting a record high of 112 million tonnes last year. India’s Tata Steel recently put its British operations up for sale, blaming the move on a flood of cheap Chinese supplies.

But overseas sales will be difficult this year, given complaints of dumping and rising protectionism from Europe, the United States and Southeast Asian countries, CISA said.

The United States has blamed China for not effectively dealing with overcapacity, while the latter has said blaming it for global steel woes was a lazy excuse for protectionism and that such finger-pointing would be counter-productive.

A meeting of ministers and trade officials from over 30 countries this week failed to agree measures to tackle the global steel overcapacity.

And this comes at a time when China’s output is picking up.

China’s steel production hit a record high of 70.65 million tonnes in March, amounting to 834 million tonnes on an annualised basis. Traders and analysts expect output to rise further in April and May.

China accounts for about half of global steel production with a total official capacity of 1.13 billion tonnes. The country aims to cut between 100 million and 150 million tonnes of crude steel capacity over the next five years. (Reporting by Ruby Lian, David Stanway and John Ruwitch; Editing by Himani Sarkar)

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