China's crude steel output in the first half of the year hit 323 million tonnes, up 21.09 percent year on year, sparking concern about increases in inventory and second half production.

Crude steel output per day in the first half averaged 1.7855 million tonnes, up 14.77 percent compared to the same period last year, Luo Bingsheng, vice president of the China Iron and Steel Association (CISA), said Tuesday.

The growth in output came on the back of increased domestic demand and expectations for steel price rises, Luo said.

China's economy expanded 11.1 percent year on year in the first half of 2010, with fixed-asset investment rising 25 percent to 11.4187 trillion yuan (1.67 trillion U.S. dollars).

But the rapid growth in production is leading to oversupply, with CISA figures showing total inventory at China's 22 large and medium-sized cities had reached 10.8 million tonnes by the end of June, up 34.16 percent since the beginning of the year.

Luo said oversupply may lead to a decline in steel prices and he forecast output to fall in the second half.

The increase in output is also affecting the environment.

CISA figures showed the sector's total electricity consumption in the first half jumped 29.3 percent year on year while exhaust gas emissions rose 13.18 percent.