The China Iron & Steel Association said that China's steel manufacturers booked a combined net profit of CNY 24.46 billion in the first quarter of this year, more than the CNY 21.8 billion recorded in the same period of 2010.

The CISA said in its quarterly report that Chinese steel manufacturers booked CNY 840.8 billion in sales in the first three months of this year. However, the average gross margin of the steel industry was only 2.91%. The association did not provide comparable figures. The average steel production cost rose by 27.5% YoY.

According to statistics released by China's General Administration of Customs, in the first quarter of this year, the average price of imported iron ore increased 59.5% year on year to USD 157 per tonne. Iron ore is one of the main raw materials to make steel.

The CISA said that China's crude steel production increased 8.7% YoY to 169.9 million tonnes in the first quarter of this year. The association said that China's steel industry had high production costs and low profits due to the increasing iron ore prices in the global market in the first quarter this year.

The annual output capacity of China's steel industry was 768 million metric tonnes at the end of 2010, and market supplying capacity has exceeded actual demand.

Mr Li Shijun, chief analyst for CISA, said that China is expected to have an annual steel output increase of 6% in the period from 2011 to 2015, compared with an annual growth of 12% from 2006 to 2010 and nearly 23% between 2001 and 2005.