China's steel output grew by 9.6% y-o-y in the first half to 350Mt, but its sales-profit ratio dropped to 2.42%, the lowest in years, the Ministry of Industry and Information Technology (MIIT) said.
The China Daily newspaper reported that the ministry said on its website the soaring price of iron ore was the main reason for the weaker profitability.
Chinese steel producers' average sales-profit ratio stood at 7.26 in 2007. Since then, the figure began to slip.
The transformation and upgrading of the industry are urgently needed to enhance steel producers' competitiveness, MIIT said.
In the first half of this year, China imported 334Mt of iron ore, 8.1% more that the same period last year, with the average price up by 42.4% y-o-y to $161/t.
MIIT predicted steel output will hit a new record high of 690M to 700Mt in 2011.
"The whole industry will maintain high output but low profit for quite a long time," MIIT said.