The outlook of China's steel industry will be better this year than 2009 as the impact of the stimulus package continues, the Ministry of Industry and Information Technology (MIIT) said Saturday.

A strong increase in new investment plans would help boost domestic demand for steel while improving external demand following world economic recovery would encourage steel exports, the MIIT said.

The implementation of a proactive fiscal policy and moderately easy monetary policy injected ample liquidity into the market and provided the steel enterprises with easy access for fund, it said.

However, excess capacity, still weak external demand and rising production costs would all impose pressure on the development of the industry, the ministry said.

China's crude steel production capacity was forecast at 700 million tonnes at the end of 2009, compared with 660 million tonnes at the end of 2008.

In 2009, China's steel output rose 13.5 percent to 567.84 million tonnes. Its 68 large and medium sized iron and steel companies reaped 55.39 billion yuan (US$8.12 billion) in profit in 2009, down 31.43 percent from a year earlier.