Domestic iron ore prices rose 17 percent in March over the previous month to $177 per ton on Feb 12, according to data from industry watcher Mysteel.com. That price is for 66 percent iron content ore and includes tax and transport.

At $177 per ton, the price is still lower than the spot price of imported iron ore.

Similar iron ore from Brazil rose to nearly $185 per ton on Monday.

Iron ore is typically classified as high grade when its iron content is above 65 percent.

Since imported ore rose above $130 per ton, some Chinese steel mills have enhanced the iron content of domestic ore, said a salesperson from Hebei Iron and Steel Group.

Industry experts said the shift back to domestic ore supplies will enhance domestic ore mining.

Low-grade iron ore production is likely to rise by 10 percent to 950 million tons this year, said Hu Kai, an analyst with Umetals.com.

An executive manager from a private steel company based in Hebei province said domestic ore supplies will account for 20 percent of the company's raw material usage this year, while that figure was 5 percent last year as the global financial crisis weighed on imported ore prices.

China has domestic iron ore reserves of 62.4 billion tons, but most iron ore mines have low iron content, adding to the costs of mining one of the most useful metals in the world.

When imported iron ore costs are lower, domestic miners suffer from lost profits, with some pushed out of business. But with the surging domestic ore prices spurred by rising imported ore prices, China's miners have shifted back to sourcing from the local markets.

Iron ore producer China Tian Yuan Mining's planned listing comes on the back of strong domestic demand and a recovery in the global commodities market.

Tian Yuan, the largest private iron ore producer in Hebei province, plans to raise up to $400 million in an initial public offering ahead of a listing in Hong Kong, Dow Jones quoted an unnamed source as saying on Friday.

China is the world's largest consumer of raw materials for steel making. The country's crude steel demand this year is forecast to reach 620 million tons, up about 10 percent from last year.

Steel mills increased iron ore imports by 42 percent to a record 628 million tons last year, and imported ore accounted for up to 69 percent of total consumption by Chinese steel mills, according to official data.