BEIJING - Chinese steel companies produced a record amount of crude steel in the first nine months, despite the government's efforts to thin the sector, according to an industrial report on Wednesday.

China made over half of the world's crude steel from January to September, with total crude steel output up 2.34 percent from last year at 618 million tons in the period, the China Iron and Steel Association (CISA) said.

Since overtaking Japan to become the world's largest steel producer in 1996, China's steel production repeatedly hit new heights in recent years.

The country's soaring steel production came as the sector struggled with a worsening overcapacity problem amid the economic slowdown.

CISA data showed the output of pig iron, an intermediary product in steelmaking, added 0.38 percent year on year to 542 million tons in the first nine months, while rolled steel production expanded by 5.02 percent to 839 million tons.

However, the average rolled steel price dropped to the lowest level since January 2003 as steelmakers relied on price wars to attract customers due to oversupply.

"The increased output has made the oversupply problem even worse in the market," said Zhang Changfu, CISA vice president.

As domestic demand remained sluggish, some steelmakers turned to overseas markets, driving up the country's rolled steel exports by 39.3 percent to 65.34 million tons in the first nine months, according to CISA.

It looks certain that China's full-year steel exports will exceed 80 million tons, Zhang said, warning that such low value-added exports may increase trade frictions, and exporting the overcapacity won't be a long-term solution.

Sales revenues of large and medium steel companies dipped 0.22 percent year on year to 2.7 trillion yuan ($440 billion) in the January-September period, according to CISA data.

Even as combined profits of steel companies expanded to 19.3 billion yuan in the period, one-fourth of steel makers were still operating at a loss, according to CISA.

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