The Chinese government has announced new policies to counter the serious problem of oversupply in the steel industry.

The new policies will result in the closure of factories with low productivity and the scrapping of out-of-date equipment.

The National Development and Reform Commission (NDRC), the country's industrial watchdog, on Friday made public a notice on controlling steel output.

According to the notice, during the 11th five-year period (2006-2010), the elimination of out-of-date iron-smelting equipment and factories in China will reduce steel productivity by 100 million tons.

Before next year, the removal of redundant equipment will reduce production by 55 million tons.

Statistics from the NDRC showed that of the total 420 million tons of steel produced in China in 2004, about 100 million tons were made by low-productivity blast furnaces, about 27 percent of the total output.

About 13 percent of the total output, about 55 million tons, was produced by small converter and electric furnaces under 20 tons in weight.

All this equipment, which consumes a lot of energy and causes serious pollution, will be scrapped under the new regulations.

The NDRC notice also revealed the restructuring of the country's major steel-production bases. China plans to develop Caofeidian, an island 80 km south of Tangshan in Beijing's neighboring province of Hebei, into a new major steel base.

By 2010, Beijing's leading steel maker Capital Iron and Steel Group Co., will be located there which will mean the steel giant, regarded as one of Beijing's worst polluters, will end all production in the capital.

The NDRC said the relocation model of steel companies in Beijing will be followed by other cities, in order to develop more new steel bases in China in the future.

Some steel companies will also be regrouped into larger ones that are capable of competing in the world market.

According to the notice, two or three 30-million-ton level steel companies will be formed in China under the new adjustments, in addition to a large number of large steel companies each capable of producing more than 10 million tons of steel a year.

The NDRC is hoping that the total output of the country's top ten steel makers will account for more than half of the national total output.

According to the NDRC, most of China's out-of-date steel and iron equipment and factories are located in the country's northern and eastern regions, and the provinces of Hebei and Shanxi in north China assembled about 68.7 percent of China's low-productivity iron-smelting factories.

Sources with the NDRC said that by the end of May this year, 21 blast furnaces with a total production capacity of 3.5 million tons, and 12 small converters with a total capacity of 2.6 million tons have been retired in Hebei Province.

(Xinhua News Agency July 1, 2006)