China is making headway on a decade long program to create giant mining groups so it can play a bigger role in negotiating iron ore prices with more established rivals in the world.

The country plans to establish a large mining conglomerate focusing on iron ore extraction and smelting operations led by Liaoning based Ansteel Group, a large State owned iron and steel manufacturer, Beijing based China

Mr Shao Anlin deputy GM of Ansteel Group said that "Ansteel Group will acquire a number of mining enterprises to complete the integration work over the coming years and eventually possess an annual iron ore production capacity of 200 million metric tons in 2025."

In the meantime, up to eight large mining groups will also be integrated and established throughout China. Each individual group's production capacity of iron ore will exceed 30 million tonnes a year after a decade.

China is the world's fourth largest iron ore producer with more than 70 billion tonnes of resources. But the nation's dependence on foreign iron ore rose to 70% last year. The country's domestic steel industry has spent more than CNY 2 trillion on paying high prices for iron ore from the global market over the past 10 years.

To optimize the resources of domestic companies, the Ministry of Industry and Information Technology is working with related government departments and industry associations to draft a plan to restructure China's iron ore sector between 2016 and 2025. This document will be completed and submitted to the State Council by the end of this year.

Even though China produced 779 million tonnes of crude steel and 1.07 billion tonnes of steel products more than any other nation in 2013, its steel sector is weak because of the low quality of raw materials provided by domestic miners compared with the same products shipped from Australia or Brazil. Their prices are twice as high as Chinese iron ore.

Data from the General Administration of Customs showed that China's iron ore imports amounted to 820 million tonnes in 2013 up 10.2% from a year earlier. China produced 1.4 billion tonnes of iron ore in the same year.

According to a report by China Chamber of International Commerce released last year, The world's three biggest miners BHP Billiton, Rio Tinto Plc and Vale SA are China's main sources for imported iron ore. The companies have margins that have exceeded 50% over the past decade because they have sufficient capital support, advanced mining technology and a large number of rich mines in different continents.

Mr Ding Rijia a professor at the China University of Mining and Technology in Beijing said that "The disparity is clear. The production cost of Chinese companies is likely to rise because labor, equipment and cash flow are in short supply. It even costs more to dig new mines with rich iron ore deposits in China today."

Mr Ding said that Australian and Brazilian iron ore producers are likely to set their prices between AUD 120 and AUD 125 per tonne this year, which will savage Chinese iron ore enterprises. As a result, China will purchase more iron ore from major international sellers and produce less iron ore in its own marketplace.