China's steel industry saw its profits nearly halved in the first two months of 2019 from a year earlier, as output growth accelerated.

The sector reported profits of 29.6 billion yuan (around 4.4 billion U.S. dollars) in the January-February period, a decline of 49.5 percent year on year, according to the National Development and Reform Commission, the country's top economic planner.

The profit slump came as market supply continued to expand. Crude steel output grew 9.2 percent to 149.6 million tonnes, 3.3 percentage points faster than the same period last year.

Rolled steel production increased 10.7 percent to 171.5 million tonnes, up 6.1 percentage points year on year.

Steel exports rose 12.9 percent to reach 10.7 million tonnes, while imports slid 9.9 percent to 2 million tonnes.

As a result of government efforts to cut overcapacity, the steel market has recovered recently, prompting some companies to attempt to expand capacity, according to Lyu Guixin, an inspector with the raw material department of the Ministry of Industry and Information Technology.

With output increasing, the supply-demand balance of the steel market could be easily tipped, the official warned at an industry forum last week.