China's Baosteel criticises call for iron ore output cap

(Adds second steel firm, detail)

March 27 (Reuters) - China's Baoshan Iron and Steel , the world's No. 4 steel producer, joined global miner Rio Tinto (Xetra: 855018 - news) in dismissing Fortescue Metals Group's call for a cap on iron ore output to revive prices, saying it was "not good for fair competition."

"Companies should follow the laws of the market. Any action that is contrary to the law is unwise, and is not good for fair competition," Baosteel Chief Financial Officer Zhu Kebing told an online briefing on Friday.

Baosteel's criticism of Fortescue's suggestion came a day after the head of Rio Tinto , the world's second-biggest iron ore miner, called it a "harebrained scheme" saying there would be no benefit to Australia from trying to support iron ore prices by limiting production.

Iron ore, which hit a record low of $54.20 a tonne this week, near Fortescue's breakeven price, has lost more than half of its value in the past 12 months.

Fortescue Chairman Andrew Forrest on Tuesday called on larger iron ore miners to join Fortescue in limiting output, prompting Australia's competition regulator to investigate whether he breached the law by calling for a cartel.

Fortescue Chief Executive Nev Power said Forrest had wanted to highlight that a "last man standing fight for market share" would hurt shareholders of all companies and was not in the long term interests of Australia or iron ore buyers.

Other Chinese steel producers also dismissed the proposal.

"When miners call for production cuts, they are usually calling for others to make production cuts while they continue producing at the same level," said Shu Hong, deputy general manager of Shougang Concord International, a subsidiary of the Shougang Group, one of China's biggest state-owned steelmakers.

Baosteel's net profit slipped for a second straight year in 2014 as a slowing economy sapped demand.

But Zhu said a slide in iron ore prices helped lift profits for China's overall steel industry by 0.9 percent.

Still, excess supply would limit any recovery in steel prices, he said, adding that overcapacity in the sector would lead to opportunities for mergers. Zhu said Baosteel has no plan to merge or acquire any steel mill this year.

China aims to build three to five giant steel mills and boost the crude steel output of its top 10 steelmakers to more than 60 percent of the country's total by 2025, the state-owned Xinhua News Agency has said. (Reporting by Shanghai Newsroom; Writing by Manolo Serapio Jr.; Editing by Ed Davies)