The report also forecasts that growth in the major industries for steel consumption, such as the automobile, construction, and machinery manufacturing industries, will remain above 4 percent in 2013.

Steel demand in railway construction, in particular, is expected to see a 9.3 percent year-on-year increase in 2013 as the government has sped up investment in railway construction.

The National Development and Reform Commission announced Monday that it has approved a batch of city-rail projects with total investment of 75 billion yuan. Li said the government's new policies to stabilize economic growth have been good news for the steel sector.

The Beijing News reported Monday that the government would launch an initiative to boost mergers and acquisitions in the sector before the end of this year, a move that experts say would help to curb the sector's excessive capacity.

The top 10 companies in the sector only accounted for around 49 percent of total production in 2011, so more mergers and acquisitions are expected given the government has set a target for that number to rise to 60 percent by 2015, according to Wang from Lange.

The Beijing-based metallurgical planning and research body also forecasts that despite growing domestic production of iron ore, China will still need to import over 60 percent of the total iron ore it consumes in 2013.

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