Reuters cited Mr Wang Yifang chairman of Hebei Iron and Steel as saying that China steelmakers face a slightly better market for exports this year, but cost pressures continue to bite, making some products unprofitable.

He said that "The export situation is likely to see an improvement but it still won't recover to pre-crisis levels."

Mr Wang said steel prices on the domestic market were currently reasonable but margins were crumbling as the cost of raw materials like iron ore and coking coal soar.

He said that Hebei Iron and Steel formed from a merger of state owned Tangshan Iron and Steel Co Handan Iron and Steel Co and ferroalloy producer Chengde Xinxin Vanadium and Titanium Co is seeking to acquire smaller mills in the coming years.

Mr Wang said "You can say we have done the most when it comes to restructuring in the steel sector, especially at the end of 2008. In the next phase, we want to carry out mergers both within Hebei province and beyond."

He confirmed the company was currently in talks with Hebei-based Shijiazhuang Steel and other potential targets, but said the course of restructuring remained very difficult especially in Hebei itself. He added that "About two thirds of steel mills in Hebei are still private companies. If they are doing well they don't want to merge, and if they are doing badly they will be closed anyway."

Mr Wang also hinted that the long-term benchmark pricing mechanism for iron ore was also facing adjustments. He said that "In the past, it didn't matter if it was Rio Tinto, BHP Billiton or Vale prices were set from April 1st to March 31st of the following year."

He said after the breakdown of talks between China and the three mining giants last year, many mills were now seeking different types of contracts covering deliveries from January 1st.

Sourced from Reuters

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