The institute outlined its latest research and forecasts at a conference held in Beijing this week.
However, it forecast China's steel demand would increase less dramatically in 2018, by 0.7% to 730Mt.
In a translated statement, the institute calculated iron ore demand was expected to rise 1.3% in 2017 to 1.122 billion tonnes, with an external dependence of 88.4%.
It forecast a "micro-drop" in iron ore demand of 0.2% in 2018 to 1.12Bt.
Real estate construction, machinery, automobiles, energy and shipbuilding would be the main contributors to the country's continued steel demand, China Daily reported.
Institute president Li Xinchuang said the country would continue to cut unregulated and substandard steel mill capacity, the news outlet reported.