Prime Minister Malcolm Turnbull says China is seeking to cut its steel production after raising the issue of oversupply with his Chinese counterpart.
Mr Turnbull said he spoke with Chinese Premier Li Keqiang about the importance of ensuring that overcapacity around the world was settled during their meeting in Beijing on Thursday night.
"The issue of excess supply obviously has implications for other countries as we have seen with Whyalla where the jobs of the workers there at the Arrium plant are very much on our mind," he told reporters in Beijing on Friday.
Mr Turnbull said Premier Li spoke at length about the big challenges China faced in restructuring its steel and coal sectors and was grappling with industrial reform.
There is significant over-capacity and Premier Li is seeking to slash China's steel production by about 150 million tonnes per year.
"That is an enormous amount - you can imagine the complications and problems that arise in terms of hundreds of thousands of workers involved in that industry."
Resources Minister Josh Frydenberg says he too discussed the issue of steel oversupply with the head of Chinese steel company Baosteel on Thursday.
The world produced about 1.6 billion tonnes of steel each year and while 50 per cent came from China, China consumed 90 per cent of its production for domestic use.
The biggest exporter of steel to Australia was actually Japan, he said.
"Japan has 48 per cent of the imports into Australia of steel and China only has 16 per cent," he told ABC radio.
"It's quite important to understand when we are talking about steel and China ... Australia is the great beneficiary because we sell them our iron ore, our coking coal and that's worth more than $40 billion worth of trade just last year alone."
The global oversupply of steel will be discussed at an OECD meeting in Brussels next week.
Australia will be represented at the meeting by assistant minister Karen Andrews, angering independent senator Nick Xenophon who insists Industry Minister Christopher Pyne should be attending.
He has even offered to pay for Mr Pyne's flight to Belgium out of his own pocket.
"If he's fair dinkum about standing up for our steel industry he needs to be at this high level meeting," he told reporters on Friday.
South Australia is facing thousands of job losses after Whyalla's steel maker Arrium was placed into voluntary administration.
Australia's steel industry has long complained about government inaction in the face of a slump in prices and a surge of cheaper imports from China.
Federal Labor is calling for the mandatory use of Australian steel on all major government projects to protect the industry.
