Mills in the biggest steelmaker are churning out less even as economic growth shows signs of stabilising, showing the fortunes of the industry that led China's industrialisation may be diverging from the country as a whole.

Crude-steel production in China shrank 1.3 per cent to 410 million metric tons in the first half compared with the same period of 2014, according to the National Bureau of Statistics on Wednesday. June's output fell 0.8 per cent from a year ago.

After decades of rapid growth spurred an unprecedented expansion in steel supply, output is now dropping as mills in China contend with a property-led slowdown, overcapacity and losses. The country's producers are the linchpin of the global industry, accounting for about half of supply, and the slowdown is hurting iron ore demand. Growth in Asia's largest economy held at 7 per cent in the second quarter, beating expectations.

"China's engine for growth is changing." Enzio von Pfeil, investment strategist at Private Capital, said from Hong Kong. "Now they want to push more and more private consumption to drive growth, while before it used to be investments which need lots of steel to build bridges and roads."

Steel reinforcement bar retreated 23 per cent this year to 2125 yuan ($US343) a ton, according to Beijing Antaike Information. Last week, the benchmark fell to the lowest since at least 2003. Iron with 62 per cent content delivered to Qingdao sank to $US44.59 a ton on July 8, the lowest since at least 2009, and was at $US50.55 on Wednesday after rising 1 per cent.

Annual increases in crude-steel output have been emblematic of China's expansion for decades as supply jumped from about 70 million tons in 1991 to 823 million tons last year, according to data compiled by Bloomberg. Output probably peaked in 2014, according to the China Iron & Steel Association.

Construction is slumping as policy makers seek to shift China's economy away from investment-led growth toward consumption. Land purchased for real-estate development fell 34 per cent in the first six months, official figures showed. About 35 per cent of China's steel demand is related to housing and construction, according to Goldman Sachs Group.

"The slowdown in construction and real estate means that the Chinese economy is now less dependent on steel production than it was," Andrew Colquhoun, head of Asia-Pacific sovereign ratings at Fitch Ratings, said by phone from Hong Kong.

Output of steel products rose 2 per cent to 559 million tons in the first six months from a year earlier, the statistics bureau said Wednesday. Given the domestic slowdown, mills have been increasing overseas sales, which climbed 28 per cent to 52.4 million tons in the first half, customs data on Monday showed.

The iron ore majors still see further rises in China's output. Annual crude-steel production will climb to 1 billion to 1.1 billion tons in the mid-2020s and plateau through to 2030, Jimmy Wilson, iron ore president at BHP Billiton, the third-largest exporter, said in March. Rio Tinto Group sees continued urbanisation as supporting annual Chinese crude-steel production of 1 billion tons by 2030, CEO Sam Walsh said in May.

Iron ore imports by China, the world's largest buyer, shrank 0.9 per cent to 452.9 million tons in the first half, customs figures showed on Monday. Prices that rose as China expanded are falling to a so-called new normal level and will remain there through 2020, Rio said on Monday.