China is shipping ever more steel into world markets as its economy slows, leading to lower prices, reduced earnings at global producers and more trade disputes.

Mills in the country that produces half the world’s steel are maintaining output as domestic demand falters, exporting the surplus. Sales overseas surged 9.5 percent to 9.73 million metric tons in July, the highest level in six months, customs data released on Saturday show. Exports expanded 27 percent to 62.13 million tons in the first seven months, the highest ever for the period, according to customs data compiled by Bloomberg.

China’s shipments are about the same as output in Japan, the world’s second-biggest producer, World Steel Association data show, and Credit Suisse Group AG says they have reached extraordinary levels.

“It’s because of weakness in domestic steel demand, which has led mills to push their excess out into the international market, and that’s something which is not going to change,” Ivan Szpakowski, commodities strategist at Citigroup Inc. in Hong Kong, said by phone.

Chinese mills face declining domestic demand for the first time in a generation amid a property slump. Steel demand will drop this year and next to extend the first annual contraction since 1995, the World Steel Association said in April. With output falling only 2 percent this year, according to the China Iron & Steel Association, Bloomberg Intelligence estimates that exports may exceed 105 million tons in 2015.

Steel was a bright spot, as China's overall exports in July fell 8.3 percent from a year earlier in dollar terms. That was below the estimate for a 1.5 percent decline in a Bloomberg survey and compared with an increase of 2.8 percent in June.

Earnings Drop

Some steel mills may be ramping up output before the government orders production cuts to ensure clean air for a parade in Beijing on Sept. 3 to mark the 70th anniversary of Japan’s surrender in World War II, according to UBS Group AG.

Chinese imports of iron ore climbed 15 percent in July to 86.1 million tons, the highestlevel since December, as mills in the world’s largest buyer replenished inventories that had fallen to the lowest level in 19 months. Purchases were little changed at 539 million tons in the first seven months.

Global steelmakers are battling lower earnings as prices slump. Nippon Steel & Sumitomo Metal Corp., Asia’s biggest producer, forecast the first drop in full-year earnings in three years last month, while U.S. Steel Corp. posted a quarterly loss. South Korea’s Posco reported a profit slump and announced plans to cut staff and refocus on its main business.

Prices are retreating. The average U.S. rate of hot-rolled coil, used in buildings and automobiles, fell 33 percent to $456 a ton in the second quarter, according to The Steel Index. In China, rebar sank to the lowest level since 2003 last month.

Trade Probes

The industry is “bleeding to death,” Gary Klesch, chairman of Geneva-based Klesch Group, said Aug. 4 after pulling out of talks to buy a Tata Steel Ltd. business in the U.K.

There were eight trade probes on Chinese steel products in the first half, while a further five were added in July, according the China Iron & Steel Association.

ArcelorMittal South Africa Ltd., a unit of the world’s biggest producer, said last month it was going to fight steel from China, which is being sent to the country’s ports at prices as much as 25 percent below local output costs, and asked the government to impose tariffs.