China's Ministry of Industry and Information Technology (MIIT) Thursday announced a three-year moratorium on approvals of new expansion-related proposals in the iron and steel industry, as the government pledges to eliminate outdated capacity.

MIIT Minister Li Yizhong said overcapacity in the steel industry was "the most evident" of all the industrial sectors, with this year's estimated total output capacity at 660 million tonnes, compared with estimated demand at 470 million tonnes.

He called for steel mills to stop expansions for the next three years. Projects with total capacity of about 58 million tonnes already under construction would continue, he said.

"If the trend goes down like this, the steel industry will come to a dead end," he said.

Another move to step up elimination of outdated capacity was consolidation of the industry, he said. Steel mills in Hebei Province would reduce their overall capacity from 120 million tonnes to 80 million tonnes annually over the next two to three years.

He said the ministry was drafting steel industry consolidation guidelines aimed at reforming the world's largest market. He gave no time for their publication.

The Shanghai Securities News reported in late July that China would release the guidelines in September.

The ministry will issue another guideline on energy conservation and emissions reductions in key sectors, including the chemical and steel sectors in the second half of this year.

The country's steel mills produced 50.68 million tonnes of steel in July, up 12.69 percent year on year.

(Xinhua News Agency August 13, 2009)