Output in China's steel industry has continued to rise but the pace has slowed as the government struggles to reduce capacity in the sector, new data showed on Monday.

Crude steel production gained 2.7 percent year on year to reach 481 million tons in the first seven months of the year, down 4.4 percentage points from the rate during the same period last year, the National Development and Reform Commission (NDRC) said in a report.

In July, the steel price index came in at 92.16, down 1.41 from a month earlier, according to the NDRC.

In the first half of the year, the steel industry saw profits rise 1.1 percent year on year to 74.7 billion yuan ($12.1 billion), the data showed.

The government has been at pains to digest production gluts from an investment boom spawned by generous subsidies in the past that saw producers in "favored" sectors, including steel, expand rapidly with little regard to real market demand.

To gradually solve the problem, a ban of new projects in steel, cement, electrolytic aluminum, flat glass and shipbuilding industries before 2017, and a gradually elimination of existing substandard projects are underway.