THE profit margin of China's private-sector steel companies is better than that of state-owned mills in an industry which faces falling profitability, according to a latest report by Roland Berger.

The private mills posted a profit margin 2.8 times higher than that of state-owned peers on average in the third quarter of last year, the consulting firm said yesterday, citing a survey of 29 listed Chinese steel firms.

The report attributed the lower margin to state-owned companies having to shoulder huge historical and social responsibility burden in labor and welfare issues, an incompetent cost management system and the change in their iron ore purchasing model.

China's steel industry, the world's largest, has been struggling with higher raw material costs, weaker demand and oversupply.

French bank BNP Paribas said earlier this month that private small mills rebounded faster than the large state-owned mills because they mainly purchase iron ore from the spot market and are more flexible in iron ore sourcing globally.