China is aiming to set up a conglomerate of iron-ore mining giants that would in 10 years produce half or more of its domestic ore, in an arrangement designed to end its steelmaking industry's dependence on imports of the material.

The government wants to set up a large mining group to be led by Ansteel Mining Co., a state-backed company that's already the country's largest ore producer. The new group will comprise six to eight mining businesses, and will produce more than 200 million metric tons of ore a year.

"This will end our history of dependence on imported ore," the Metallurgical Mines Association of China said in a statement. The association is working with the Ministry of Industry and Information Technology to push the project, which stretches out until 2025.

Foreign ore currently accounts for about 70% of China's steelmaking. China produces about 1.5 billion tons of domestic ore a year--the world's largest volume by country. But analysts say its domestic industry is highly fragmented and its ore twice as costly to produce as foreign competitors.

State-owned enterprises and other miners producing more than 10 million tons a year currently account for just 35% of output, said Adam Wang, an industry analyst for Beijing-based consultancy CRU Group.

"The consolidation of this industry is going to be difficult, because it's very fragmented, more so than in the steelmaking industry," Mr. Wang said.

More than half of China's ore production comes from small miners producing 3 million tons or less a year, he said.

Chinese iron-ore costs around 457 yuan ($75) a ton to produce, compared with $30-$60 a ton for imported ore, said Pan Guocheng, chief executive of ore miner China Hanking Holdings Ltd.

The disparity drives China's dependence on foreign ore, and Mr. Pan forecast that imports would rise to 949 million tons, or 77% of its total consumption in 2016, from 72% last year.