China's steel industry continues battling overcapacity as demand for 2015 is estimated at 720 million tonnes with a slower year-on-year growth of 1.4 percent an industry report said on Wednesday.

The steel consumption for 2014 is forecast to grow 2.5 percent year on year to reach 710 million tonnes, according to China Metallurgical Industry Planning and Research Institute.

Given China's current production capacity, the debt-laden steel industry will continue to struggle with overcapacity, said Li Xinchuang, head of the institute.

Decelerated growth of downstream sectors, including machinery, construction and automobile, is the major reason behind the slowdown of steel consumption growth, Li said.

According to the report, steel demand next year from construction and machinery industry is expected to rise by 1.3 percent and 3 percent year on year, respectively.

China is the world's biggest steel consumer and producer. In the last several years, China's iron and steel sector has been pummeled by weak demand and falling prices and suffered greatly from overcapacity.