* Daily steel output fell to 1.95 mln T over May 20-31
* Stocks at mills also decline in late May
* Expectation of tight supplies supports steel prices -analyst
BEIJING, June 13 (Reuters) - Chinese steel futures extended gains for a second session on Wednesday after data from an industrial association showed a dip in daily crude output in late May amid government efforts to curb pollution.
Crude steel production by major steel firms over May 20-31 fell from a peak of 2 million tonnes a day in mid-May, but was still at a historically high 1.95 million tonnes a day, data from China’s Iron & Steel Association showed.
Steel inventories at major steel firms also declined in late May, the data showed, falling by 2.09 million tonnes to 11.83 million tonnes from the previous May 10-20 reading.
“Mills are ramping up output to cash out fat profit margins - currently around 800-900 yuan ($140.50) a tonne - and mills will continue to churn out products unless new policy comes out,” said Zhuo Guiqiu, senior analyst at Jinri Futures.
Utilisation rates at steel blast furnaces across China fell for a third week last week to 41.41 percent, curbed by recent environmental inspections in major steelmaking regions such as Hebei and Jiangsu.
The most-active October rebar contract on the Shanghai Futures Exchange rose 1.2 percent to 3,870 yuan a tonne in the morning session.
“Firm steel prices are supported by expectations of tight supplies under environmental policies,” said Zhuo, adding that the market is waiting for new property data due on Thursday for hints on steel demand in coming months.
Spot steel prices rose 0.2 percent to 4,362.01 yuan a tonne on Tuesday, data from Mysteel consultancy showed.
Dalian iron ore futures for September delivery edged up 0.1 percent to 470 yuan a tonne.
Coke jumped as much as 2.9 percent to 2,156 yuan a tonne, its highest level since March 5, as environmental checks continue to weigh on production.
Spot iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose 0.7 percent to $67.23 yuan a tonne on Tuesday, according to Metal Bulletin.
$1 = 6.4058 Chinese yuan renminbi Reporting by Muyu Xu and Tom Daly; editing by Richard Pullin