CHINA'S two major steel producers have cut prices of products for August delivery, the second consecutive reduction, under pressure from weak demand in the off season.

Other mills are very likely to follow suit and this may further bite into producers' already slim profits, analysts said.

Baoshan Iron and Steel Co will reduce low carbon hot-rolled coil by 200 yuan (US$30) per ton and some cold-rolled products by 300 yuan per ton in August. The reductions translate into a 4.6 percent cut for hot-rolled steel and 5.4 percent for cold-rolled ones.

Wuhan Iron and Steel Co, China's third-largest steel producer, will also cut prices of its major products by 300 yuan per ton.

"Most mills are expected to cut steel prices as July and August are usually the off season," said Xie Jun, GF Securities Co.

"In addition, the scrapping of tax refunds on some exports of steel products effective from today will increase the domestic supply and further weigh on the prices."

Baosteel Vice Chairman Liu Guosheng said earlier this month that the steel market would remain weak in the second half of this year.

"Sluggish demand and high costs will widen the industry's losses in the third quarter," Xie said.

However, analysts said profitability may bottom out in the third quarter and recover in the fourth quarter after steel mills moved to reduce production.

"An increasing number of steel producers will cut their production amid falling prices, which could shore up prices gradually," said Zhang Wenfeng, an analyst at Yingda Securities Co.

Analysts, however, warned most of China's small and medium steel producers may face closures.