China's steel sector swung back into the black last year as capacity reduction pushed up steel prices, the top economic planner said on Wednesday.

The profits of 373 steel companies are expected to reach 35 billion yuan ($5.1 billion) in 2016, compared with a loss of 84.7 billion yuan in 2015, according to the National Development and Reform Commission website.

Major coal companies will likely see profits more than double to 95 billion yuan last year.

China has been reducing capacity since the beginning of 2016, shutting down inefficient mines and factories, and stopping new projects.

Steel and coal, the two most troubled sectors, made great strides in cutting capacity. A large number of zombie coal mills were shut down. Two major steel companies - Baosteel, and Wuhan Iron and Steel -- merged into a more competitive corporation.

By the end of October, a total of 45 million tons of steel and 250 million tons of coal capacity had been cut, meeting annual targets ahead of schedule.

From 2016 to 2020, steel capacity will be cut by 100 to 150 million tons, with coal capacity will cut by about a half billion tons.