China's average daily crude steel output hit a record high of 2.27 million tons in March, government data showed, as steel makers ramped up production on expectations of increased seasonal demand but a slowing economy may curb output in the months ahead.

Steel demand in the world's top producer and consumer usually improves in April and May as construction and manufacturing activities perk up after the Chinese Lunar New Year holidays, encouraging mills to raise production.

Mills are expected to further boost output in April, but probably only modestly, as a cooling economy could curb demand growth for metals this year.

China's March crude steel output trumped the previous record high of 2.217 million tons hit in January and February. The monthly output stood at 70.25 million tons, up 2.2 percent from a year ago, data from the National Bureau of Statistics (NBS) showed on Wednesday. The NBS didn't provide a separate monthly figure for the first two months.

"Steel output may continue going up slowly until May, but I do not rule out the possibility that it might fall on year from June," said Judy Zhu, an analyst with Standard Chartered Bank in Shanghai.

"Many mills are struggling with tight cash flow, with a few facing permanent shutdown threats, and the central government has no intention of boosting investment to drive up steel consumption. Meanwhile, the government will take tougher measures to crack down on pollution and curb steel production," Zhu said.

China's economy grew at its slowest pace in 18 months in the first quarter of 2014, with growth between January and March dropping to 7.4 percent from 7.7 percent in the previous three months.

Hopes of a major stimulus package from the central government to counter the slowdown were dashed by Premier Li Keqiang at an investment forum last week.

As part of the government's efforts to restructure its economy and push financial reforms, it has vowed to tackle overcapacity in heavy industries by pledging tougher credit conditions and environmental protection measures.

Total steel output for the first quarter was 202.7 million tons, up 2.4 percent from the same period last year, NBS data showed. Steel products output rose 5 percent to 95.07 million tons in March from a year ago, according to the data.

Reuters
Newspaper headline: Nation's March daily steel output hits record level