China's May crude steel output hits new record high at 81.13 million tonnes

China's daily crude steel output surged to a fresh record in May, offical data showed on Thursday, as mills pumped out the construction material at full capacity to take advantage of strong profit margins.

The world's biggest steel maker produced 81.13 million tonnes of crude steel last month, up 5.8 per cent from the previous month and 8.9 per cent from the same month last year, according to data from the National Bureau of Statistics.

Daily average output climbed 2.4 per cent to 2.62 million tonnes in May from April, according to Reuters' calculations based on the offical data. May has one more day than April.

"Steel mills have been running full-load and adding scrap steel to increase output in order to cash out strong margins," said Zhuo Guiqiu, senior analyst at Jinrui Futures.

Analysts estimated mills can make up to 900 yuan ($140.70) by producing one tonne of steel products, due to firm demand and production curbs in some areas.

Utilisation rates at steel firms across the country were above 71 per cent, a level last seen before production curbs to curb pollution kicked in last year in late October.

Recent environmental inspections in some 10 regions, including top steelmaking hubs Hebei and Jiangsu, have forced some mills to cut production. But analysts do not expect the curbs to last long, unless new environmental policies add to pressure on supplies.

"Demand from downstream sectors may perform better than expected ... the market generally believes infrastructure construction sector is more active in H2 than H1, which could lift demand for steel products," said Zhuo.

Stockpiles of steel products held at Chinese mills and by traders both declined in May despite the increasing output, indicating that actual demand was still firm.

Year-to-date steel output rose 5.4 per cent from a year earlier to 369.86 million tonnes.

Output of coke, a steelmaking raw material, fell 1.6 per cent in May to 36.48 million tonnes from the same month last year following safety and environmental checks in major production regions such as Inner Mongolia and Shandong.