Baosteel's pricing decisions are generally regarded as a bellwether for the industry. A price cut for September is significant, because steel demand in China usually increases in September and October when construction picks up.

Hot-rolled coil prices will be cut by 100 yuan ($15.73) per tonne and cold-rolled coil prices of some grades by 150 yuan per tonne, Baosteel said on its website on Friday. Both products are used in construction, manufacturing and automaking.

Economic figures this week including disappointing industrial output and export growth have raised hopes that China will take more measures to bolster its economy.

Recent growth policies, including interest rate cuts and accleration of infrastructure projects, are expected to support steel demand in coming months, but market participants say more aggressive measures are needed.

"Steel demand remains sluggish. We estimate that even if steel demand improves in the third and fourth quarters, the overcapacity would overwhelm any significant price upside potential, and steel mills would continue to struggle to reach breakeven," Hong Kong-based Mirae Asset Securities said in a research note.