* China steel output down 1.3 pct in Jan-June
* China Q2 GDP growth held steady at 7 pct
* Steel demand to weaken further, to lead to more output cuts - CISA (Adds comment from industry group, updates prices)
By Manolo Serapio Jr
MANILA, July 15 (Reuters) - Shanghai steel futures retreated on Wednesday, pressured by shrinking demand in China that has cut output in the world's top producer in the first half of the year, with a further reduction seen likely.
China's crude steel output dropped 0.8 percent in June from a year earlier, government data showed, bringing January-June production to 409.97 million tonnes, down 1.3 percent from a year ago. ID:nL3N0ZP3QU
China's economy grew an annual 7 percent in the second quarter, the same pace as in January-March, and slightly ahead of market forecasts for growth of 6.9 percent. ID:nL4N0ZU2IF
"Going into the third quarter, the steel product market will gradually enter its off-season, and we forecast that steel product demand will weaken further," the China Iron and Steel Association said in a monthly report on Tuesday.
"At the same time, taking the current serious losses at steel mills into consideration, mills will cut output to a large extent in July."
Amid a slowing economy and cooling property market, Chinese steel consumption dropped 5.1 percent in the first five months of 2015.
The most-traded rebar for January 2016 delivery on the Shanghai Futures Exchange SRBcv1 fell 1.4 percent to close at 2,044 yuan ($330) a tonne. The most-active contract fell to a record low of 1,891 yuan last week.
"I see a further drop in steel prices. The steel market in China is quite competitive. When demand is weak every mill may choose to drop their prices in order to keep their market share," said a Shanghai-based trader.
Further production cuts in China's steel sector may hit demand for raw material iron ore, limiting any upside potential for prices that last week dropped to below $50 a tonne, the first time since April.
"Market activity remained subdued as buyers continue to bid below $50/tonne and sellers look determined to hold cargoes and wait to get a clearer picture," ANZ Bank said in a note.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI fell 1 percent to $49.40 a tonne on Tuesday, according to The Steel Index.
Down for a third year in a row, the spot benchmark has lost nearly 31 percent in 2015.
On Wednesday, the January 2016 iron ore contract on the Dalian Commodity Exchange DCIOF6 ended flat at 354.50 yuan a tonne.
($1 = 6.2080 Chinese yuan)