WRAPUP 2-Steel firms see price pressures as China ups output

* Nippon Stl raises FY recurring forecast to Y20 bln

* New profit forecast above consensus of 13.5 bln yen

* Baosteel Q3 profit up 6.7 percent, cautious on Q4

* Sumitomo Metal, Kobe Steel post H1 losses

TOKYO, Oct 29 - Nippon Steel Corp and China's Baosteel, the world's No.2 and No.3 steelmakers, warned of pressure on prices from China ramping up output, even as signs of improved demand bolstered their quarterly earnings.

Japan's Nippon Steel, which trails ArcelorMittal and vies with Baosteel and fourth-ranked POSCO in Asia, raised its full-year outlook on the strength of a government-backed boost in car sales and strong exports to China.

But production boosts by Chinese mills following Beijing's near-$600 billion stimulus package and rising steel inventories are worrying the company.

"Uncertainties have increased since October as inventories have swelled in China and they began affecting prices in South Korea," Shinichi Taniguchi, executive vice president at Nippon Steel, told a news conference.

"As South Korean mills are also building up capacity, we need to closely watch the demand and supply situation in Japan, China and South Korea."

Baosteel also voiced concern about the zeal to boost steel output in China, both the world's largest steel consumer and producer.

"The domestic steel market faces a worsening structural oversupply, while demand growth in downstream sectors is slowing," Baosteel said in a statement.

"New capacity is putting additional pressure on the market, steel inventories remain relatively high and steel mills have been steadily lowering shipment prices."

CONSUMPTION BOOST

Baosteel's net profit for July through September rose 6.7 percent with help of Beijing's stimulus measures, including incentives to boost automobile and home appliance consumption.

Nippon Steel's smaller domestic rivals Sumitomo Metal Industries Ltd and Kobe Steel Ltd both posted first-half losses, reinforcing the struggle Japanese firms are having to keep up with Asian rivals due to a strong yen and big inventory writedowns..

Earlier this week, ArcelorMittal dampened recovery expectations with a muted forecast for the final quarter even though it returned to profit in July-September, but POSCO by contrast has signalled a brighter outlook for Asian steelmakers on improving global demand.

Nippon Steel booked a third consecutive quarterly loss, hit by the worst economic slump in decades and massive inventory writedowns.

Its 30.3 billion yen ($334 million) quarterly recurring loss, before tax and special items, was narrower than its own forecast of a 53.3 billion loss. The company booked a profit of 118.15 billion a year earlier.

Nippon Steel raised its forecast for the year to March to 20 billion yen from a prior break-even estimate, above a market consensus for a 13.5 billion profit.

"The outlook is neither positive or negative, so the points are whether its stock price is cheap and the momentum of its business," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

"The current stock price is not so expensive, but the macro conditions are not good enough to encourage buying it up."

Shares of Nippon Steel closed down 0.3 percent while the broader market fell 1.8 percent.

Nippon Steel's Taniguchi said China's rapid output rise could have daunting effects on iron ore prices next year.

"If China alone continues to raise iron ore imports next year, mining companies will try to raise prices of iron ore even though the overall steel market is weak ... We need to avoid this risk," he said. (Additional reporting by Taiga Uranaka; Editing by Lincoln Feast and David Holmes)