Due to the price hike of iron ores as well as coal, electricity and oil since this year, China's steel industry cannot continue its low-cost production as before, according to China Steel and Iron Association.

The change of external environment has severely restricted the development of China's steel industry, said Vice President Luo Bingsheng of the China Steel and Iron Association.

Since April 2005, the price for imported iron ores jumped 71.5 percent, bringing enormous pressure to China's steel plants. In the first five months this year, the cost for pig iron production, which had soared by 44 percent in 2004, rose 14.92 percent, figures show.

China is now the world's largest iron ores importer. In the first half of this year, China imported 130 million tons of iron ores, accounting for over 30 percent of the global shipment.

Those steel plants located in hinterlands pay much more for imported iron ores transport than those located in coastal areas, Luo said.

As the production cost keeps rising, restructure and regroup have become major tasks faced by China's steel and iron industry, he said.

The China Steel and Iron Association expected China to produce raw steel of 332 million tons this year, up 21.63 percent and larger than the domestic demand.

Some experts suggest steel plants to optimize their industrial structure and produce more products with high added value and advanced technological level.