Chinese steel plants reported shrinking profits in the first seven months of this year as rising raw material prices hit.

Member enterprises of the China Iron and Steel Association (CISA) raked in 2.43 trillion yuan (about 339 billion US dollars) in sales revenue during this period, up 9.75 percent, while profits fell by 23.93 percent year on year to stand at 123.582 billion yuan.

Industrial giant Baoshan Iron & Steel saw its net profit down over 38 percent year on year in the first half of this year.

The CISA attributed the dropping profits to rising raw materials prices.

Purchase costs of domestic iron ores rose 19.88 percent year on year during this period, while that for imports climbed 29.13 percent.

Imports of iron ores rose 21.06 percent month on month in July despite rising costs.

China is the world's largest steel producer, consumer and iron ore importer. The country's steel sector has been undertaking a drive to cut excess capacity in a bid to improve industrial efficiency.