The growth rate of China's steel demand will decline from 6.3 percent this year to 3.2 percent in 2014 in the wake of the country's economic transformation and the government's efforts to improve the environment.

The nation's steel consumption next year is estimated at about 715 million metric tons, which represents a 3.2 percent year-on-year growth rate, Li Xinchuang, head of the China Metallurgical Industry Planning and Research Institute, said on Friday.

He estimated that steel consumption this year will be 693 million tons.

"The government will carry out reform policies to boost the economy as well as investments policies in sectors including high-speed railway and the energy-saving industry, which will be beneficial for the steel industry," he said.

However, industrial consumption of steel will be curbed by the government's policies to improve air quality, which will result in less steel usage in some high-polluting sectors in 2014.

In addition, overcapacity in the sector and the lackluster global economic conditions have led to slowing investment growth in the country, which will also reduce steel demand.

He estimated that the shipbuilding industry will consume 12.5 million tons of steel this year, down 21.9 percent compared with last year.

"The steel industry's downstream business will see slower development next year. The shipbuilding industry, specifically, will face negative growth, which will lead to flat steel consumption in 2014," Li said.

In the construction sector, China is expected to use 381 million tons of steel this year, which represents an annual growth rate of 4.4 percent. However, next year, the growth rate will drop to 2.4 percent with estimated consumption of 390 million tons in the sector, according to the institute.