China's steel output grew by 9.6 percent year-on-year in the first half to 350 million tonnes, but its sales-profit ratio dropped to 2.42 percent, the lowest in years, the Ministry of Industry and Information Technology (MIIT) said Tuesday.

The ministry said on its website that the soaring price of iron ore was the main reason for the weaker profitability.

Chinese steel producers' average sales-profit ratio stood at 7.26 in 2007. Since then, the figure began to slip.

The transformation and upgrading of the industry are urgently needed to enhance steel producers' competitiveness, MIIT said.

In the first half of this year, China imported 334 million tonnes of iron ore, 8.1 percent more that the same period last year, with the average price up by 42.4 percent year-on-year to 161 U.S. dollars per tonne.

MIIT predicted steel output will hit a new record high of 690 million to 700 million tonnes in 2011.

"The whole industry will maintain high output but low profit for quite a long time," MIIT said.