A LARGE number of China's steel producers will report losses in the second half of this year, the country's steel association said yesterday.

"As steel prices lost ground since May and raw material such as iron ore and coking coal keeps climbing, some steel mills could not sustain production and made losses. The condition will be hard to reverse in the second half," said Shan Shanghua, China Iron and Steel Association general secretary.

In the first six months, profits at China's major steel firms reached 50.72 billion yuan (US$7.5 billion), 21.22 times the same period of last year when the industry was amid the fallout from the global financial crisis.

However, profits saw month-on-month drops of 17.9 percent in May and 37.77 percent in June as steel producers reduced production to counter falling demand.

Profit margins stood at 3.47 percent in the first half, far below the average of the nation's industrial companies, the association said.

"As the effects of the government's stimulus package fade and China steps up efforts to curb energy-intensive industries, the steel industry will face more unfavorable conditions in the rest of the year," Shan said.

Steel consumption growth has continued to decelerate since February, and demand dipped 1.14 percent month on month in June.

Meanwhile, production maintained a relatively fast pace, leading to intensified oversupply.

Stockpiles reached 10.8 million tons at the end of June, up 64.38 percent from a year ago, the association said.