Chinese metallurgists are in a difficult situation: expert

China's steel industry has been in its toughest conditions for two decades, amid falling prices, weak demand and overcapacity, leading to mergers and acquisitions.

Li Xingchuang, head of the China Metals Industry Planning and Research Institute, said that "In the first months of 2014, China's large and medium-sized steel companies lost 2.8 billion yuan. The situation deteriorated in March."

Li said that "Addressing the overcapacity issue is key to various problems in China's steel industry. Many Chinese steel companies face operational difficulties and obstacles to modernization, while many industry problems are closely related to overproduction."

He said that "the method of making a profit from large production capacity no longer works in the steel industry. Companies need to be creative in both management and marketing." The 10 most profitable steel companies account for 22 percent of the country's steel production, as the peak time for mergers in China's steel industry has yet to come. This will be the most important trend for the next 10 years.

According to the China Iron and Steel Association, the largest domestic steel companies made profits mainly outside the steel sector business. This quarter will be the worst profit in a century for China's steel industry, and most Chinese steelmakers will be forced to shut down in the next three years under pressure from tighter credit and high environmental requirements.