Firmer Chinese demand for steel and higher iron ore prices signal an improving market and suggest the worst may be over for China’s troubled steel mills, according to its most prominent steel representative body.

The China Iron and Steel Association, a government-linked lobby group for the biggest steel mills, said although half its members reported net losses in the first nine months of the year, it expected them to “turn around” and be able to report full-year profits for 2012 because of improvements in steel demand and prices.

“The main reasons are that steel demand has picked up gradually, steel mills have controlled production well, and iron ore prices have fallen,” said Wang Xiaoqi, deputy head of the iron and steel association. “I’m also positive about the first quarter of next year.”