The purchasing managers' index (PMI) tracking China's iron and steel sector increased for the 5th consecutive month to 57.3 percent in April, up 7.6 percentage points from March, an industry federation said on Sunday.

It is the highest monthly reading since March 2013 and also the first time for the index to climb above 50 percent in two years, indicating the expansion of the steel industry, according to the China Federation of Logistics & Purchasing (CFLP).

In a breakdown, the sub-index of new order hit 65.6 percent, a 62-month high; that of purchase price has surged to 75.3 percent, the highest level since August 2013; and the production sub-index has rebounded to a 38-month high, the CFLP's Steel Logistics Professional Committee said in a report.

The committee expected a rising steel demand as economy warms.

Chinese steel producers experienced their worst year in 2015 as overcapacity and tumbling steel prices squeezed profit margins, with combined losses in primary business soaring 24-fold from 2014 to over 100 billion yuan (15.5 billion U.S. dollars), China Iron and Steel Association (CISA) said in April.

China's steel industry, the world's largest, is a major target of nationwide campaigns to reduce overcapacity and upgrade production as part of the country's efforts to battle economic headwinds.