Chinese steel companies are growing despite widespread losses and the government's efforts to thin the sector.

Since overtaking Japan to become the world's largest steel producer in 1996, China's steel production reached new heights in June with record high averages for daily crude steel output. But the country's soaring steel production came as the sector struggles with overcapacity and losses amid an economic slowdown.

According to the latest data from the National Bureau of Statistics, the country's average daily output reached 2.31 million tonnes in June, up 1.7% from the previous month. Total crude steel output in June was up by 4.5 percent from last year at 69.29 million tonnes.

The output of pig iron, an intermediary product in steelmaking, also rose 2.3% to 60.01 million tonnes in June, while rolled steel production expanded by 7.1% to 98.05 million tonnes.

In the first six months, China produced 411.91 million tonnes of crude steel, or 3% more than a year ago. In the same period, pig iron output grew 0.5% YoY to 362.02 million tonnes while rolled steel production increased 6.4% to reach 552.25 million tonnes.

According to data by the China Iron and Steel Association, while output grew, profits from steel production have been sluggish. Combined profits of Chinese steel companies in the h1 rebounded to CNY 2.27 billion following a loss of CNY 2.33 billion in the Q1. However, their steelmaking operations incurred huge losses that were offset by CNY 4.32 billion in investment revenues and 3.88 billion in non operating income.

The record high production capacity indicated the government's efforts to rein in the sector's growth have been in vain. This month, the Ministry of Industry and Information Technology again ordered the steel sector to eliminate laggard and excessive capacity by as much as 46.86 million tonnes by the end of September.