Iron and steel producers' profits rose an estimated 45 percent last year, buoyed by a booming economy and strong international demand, but surging production costs reduced margins, an industry group said.

Profits hit a record 190 billion yuan (26 billion U.S. dollars), said Zhang Xiaogang, president of the China Iron and Steel Association (CISA).

China, the world's biggest maker and consumer of steel, produced 489.2 million tons of crude steel and 469.4 million tons of pig iron last year, both up more than 15 percent year-on-year, according to CISA data.

Net exports of crude steel soared 58 percent to 54.88 million tons.

Profits were mainly concentrated in the country's top 20 producers, which accounted for 61.7 percent of the 2007 figure.

Smaller producers should team up with large ones, rather than expand their production capacity, CISA consultant Wu Xichun said.

Major iron and steel companies reported record profits of 144.7 billion yuan, up 49.5 percent year-on-year, on sales of 1.99 trillion yuan, up 32.8 percent. Investment returns from the capital market contributed 13.5 percent of their profits, Wu added.

But rising prices for iron ore, coal, electricity and transport pushed up production costs, cutting profitability, said Zhang. Costs jumped as much as 55 percent for some producers that relied heavily on imported minerals, he said.

China's booming economy has boosted its imports of raw materials ranging from oil and iron ore to nonferrous metals. The country was estimated to have imported a record 367 million tons of iron ore last year, mainly from Brazil and India.

Production costs would rise further this year as raw material prices increased and environmental protection fees rose, he said.

(Xinhua News Agency February 18, 2008)