BEIJING - China's steel prices will continue to firm up in 2018 as production and supply are becoming more balanced, according to a senior official at the China Iron and Steel Association (CISA).

"Prices are rising in 2017 due to government effort to close small mills that churn out low-quality steel made from scrap metal. As a result,a batch of money-losing producers begin to make profit," Gu Jianguo, deputy head of of CISA, told an industry forum on Friday.

"Prices have seen a reasonable rebound, while it is quite normal to see tight supply and price fluctuations during certain periods," he said.

Gu said that environmental checks would curb output in 2018 as new capacity was added, with demand and supply becoming balanced.

He said steel producers should speed up deleveraging, phasing out zombie firms, and disposing of assets after capacity cut.

China has been striving to close low-quality small mills, leading to decreased supply.

The crackdown on small low-end furnaces, which account for 4 percent of total steel output, comes as the government aims to cut excess capacity, tackle pollution and improve safety measures.