Plant shutdowns likely as emission standards kick in (2)

But industry profits declined 98 percent year-on-year to 1.58 billion yuan in 2012, or 2.1 yuan (53 US cents) each ton of steel, almost the cost of bottled water, Yuan said.

He added the iron and steel sector is expected to see slight growth this year after the 2012 slowdown.

"But we are now in a dilemma. Production leads to loss, while the banks keep pressing on debt repayments."

He said banks must shoulder part of the ongoing losses in the iron and steel industry, given around 80 percent of the capital being used is from the banks.

He also urged the government to negotiate with iron suppliers such as BHP Billiton plc, Rio Tinto Group and Vale SA, which control China's iron ore import prices.

Li Xiaobo, the chairman of Taiyuan Iron & Steel (Group) Co Ltd in Shanxi province, added that China's iron and steel industry paid tens of billions of yuan in interest to banks.

Li, also an NPC deputy, said: "In addition to asking the government for structural tax reductions, innovation is the right way to resolve the overcapacity.

"But more efforts should be made to set up mechanisms to allow more innovation including patent and intellectual property rights protection, venture capital use and support to small and medium-sized enterprises."

Li said his company will increase overseas investment to break the iron ore monopoly of the transnational giants.