(Yicai) Nov. 17 -- China’s major steel mills have managed to slow the drop in profitability since June, after a dismal performance in the first five months, as demand in emerging industries and manufacturing picks up, according to a department head at the China Iron and Steel Industry Association.

The steel industry is becoming less dependent on the real estate sector and there has been an uptick in demand in the new infrastructure and new energy sectors as well as in manufacturing industries such as automobiles, shipbuilding and home appliances, Diao Li, director of the association's industrial operation department, said at the Steel Technical and Economic Forum yesterday.

Key steel producers logged a 34.1 percent dive in profit in the first three quarters from a year earlier to CNY62.1 billion (USD8.6 billion), according to data released by the association. This is a huge improvement from the first half when profit sank 68.8 percent year on year.

But the country’s steel and iron sector remains hampered by slower-than-expected growth in demand, high imports of iron ore and low steel prices, said Tian Zhiling, executive vice president of the Chinese Society of Metals.

There are also structural problems such as overcapacity combined with low industrial concentration, which leads to cutthroat competition between industrial peers, he added. The steel industry as a whole is still thwarted by the state of high output but low efficiency.

Accelerating the reorganization of the steel industry may be necessary to spur its high-quality development, Diao said. Qualified enterprises should explore the joint reorganization of the industry, as well as the merger of upstream and downstream business to strengthen their resistance to risk.

The restructuring of the steel industry will upgrade the entire sector and also help integrate research and development, improve efficiency and weaken the negative impact of cyclical factors on the industry, Diao said.

In the first three quarters, the crude steel output of China’s 10 biggest steel mills was 324.8 million tons, accounting for only 40.9 percent of the nation’s total and indicating that there is plenty of room for consolidation across the industry, according to CISA data.

Editor: Kim Taylor