* Mid-Aug output marks second increase in a row * Demand expected to pick up in Sept-Oct * Market concerned over impact of tightening moves

(Adds background, quotes from trader and mill) By Ruby Lian and David Stanway SHANGHAI, Aug 29 (Reuters) - China's daily crude steel

output stood at 1.947 million tonnes over Aug. 11-20, up 0.26

percent from the previous 10 days, industry data showed on

Monday, with mills planning to take advantage of a revival in

demand in the autumn. Daily output in the world's biggest steel producer and

consumer rose for the second ten-day period in a row, according

to data from the China Iron and Steel Association (CISA). Market players expect demand to pick up in September and

October, keeping steel production at high levels. "China's overall investment in construction projects has

remained aggressive this year, the driver behind steel

production," said Bill Chen, a senior trader with Hong

Kong-based Smart Timing Steel Ltd. Mills aimed to cash in on the building programme even during

the sweltering summer, when construction normally slows, with

daily output remaining close to the record of more than 2

million tonnes set in the last 10 days of June. Daily steel output has stayed above 1.9 million tonnes since

February, up from an average of about 1.7 million tonnes last

year. "The next two months are normally the last opportunity for

large sales for steel mills as demand traditionally picks up and

pushes prices higher," said an official with major steelmaker

Anshan Iron & Steel Group Corp . Chinese major steel mills have all raised main product

prices for September bookings.

H2 UNCERTAINTIES China's tightening moves may further weigh on steel prices

in the months ahead, with the world's second-largest economy

ordering banks to include margin deposits in required reserves

at the central bank, after repeatedly raising RRR and interest

rates since late-2010. "The PBOC's latest move to expand the RRR base demonstrates

the government's intention of remaining on a tightening track,"

said Henry Liu, regional head of commodity research at Mirae

Asset Securities in Hong Kong. He said in a note that steel traders were already suffering

from the credit crunch, while demand growth was dependent on a

single factor -- construction activities. "Without the participation of traders, we see little chance

of steel price improvement," he added. Some of China's biggest steel mills, which mainly produce

flat steel products, have suffered from weak demand from key

customers such as the auto sector, and their profits have been

further eroded by persistently high costs. "Steel production costs have been high, but I am worried

about steel prices after October and even next year because the

uncertain economic outlook still weighs on demand," the mill

official said. The following table shows changes in daily output since the

beginning of the year.

Period Daily Change output (pct) (mln T)

Aug 11-20 1.947 +0.3

Aug 1-10 1.942 +0.4

July 21-31 1.935 -0.7

July 11-20 1.950 -0.3

July 1-10 1.955 -3.1

Jun 21-30 2.018 +3.2

Jun 11-20 1.955 -0.6

Jun 1-10 1.967 +2.7

May 21-31 1.915 +3.5

May 11-20 1.984 +1.9

May 1-10 1.947 +0.3

Apr 21-30 1.941 +1.9

Apr 11-20 1.904 -1.1

Apr 1-10 1.933 +0.6

Mar 21-31 1.922 -1.2

Mar 11-20 1.945 +2.2

Mar 1-10 1.903 -0.4

Feb 21-28 1.912 +5.4

Feb 11-20 1.814 +1.5

Feb 1-10 1.787 +4.5

Jan 21-31 1.710 +0.9

Jan 11-20 1.695 -5.5

Jan 1-10 1.794 +3.5

Source: CISA