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China has long wanted to reduce dependence on ore imports and boost domestic supplies.
"The figures indicated that expanding domestic ore production effectively helped to reduce dependence on costly ore imports," said Deng Qilin, chairman of Wuhan Iron & Steel Group, the country's third-largest steelmaker.
China has domestic ore reserves of 62.4 billion tons, but most mines have low iron content, adding to the cost of mining. Rising imported ore prices stimulated Chinese miners to source from the local markets.
Domestic steel mills also started cutting product prices in June, signaling a market adjustment due to weak downstream demand.
Most of the big steel mills like Baosteel and Wuhan Iron & Steel cut August prices by 5 percent to about 300 yuan per ton from July.
Average steel prices in China peaked in April after starting to rise in August last year, but steel prices began to fall after the government released its macroeconomic policies to control property prices.
Steel production in China reached a four-month low in June due to weak demand from real estate companies and the automobile industry. The nation produced 53.77 million tons of crude steel in June, 4 percent lower than the 56.1 million tons in May.
"Higher costs and falling product prices will see many steel mills suffering losses in July and force them to cut production," said Zhang Xiaogang, chairman of Anshan Iron & Steel Group, China's fourth-largest steel company.