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China's steel industry authorities have announced measures to eradicate low capacity iron mills with high energy consumption.

Furnaces with a maximum 200 cubic meters in volume, converters and electric furnaces with maximum capacities of 20 tonnes will no longer be put in operation in China, an official with the China Iron and Steel Association (CSIA) said.

China became a net steel exporter in 2006, but has long been plagued by low added-value products, which was likely to cause trade friction, industry experts said.

The northern Hebei province, by the end of last year, had ordered the phasing out of 26 outdated mills with a total annual capacity of 3.98 millions of steel and 3.73 millions of iron.

The local authority had imposed hefty electricity costs on the mills to accelerate the process by squeezing their profit margins, before they were completely forced out by the end of 2007.

They would find it hard to survive if they lost price advantages, said Wu Xichun, councilor with the CSIA.

For the last 10 years, China has produced more steel than any other country, reaching 352 million tonnes in 2005, nearly one third of the world total, according to the National Development and Reform Commission.

Qi Xiangdong, deputy president of CSIA predicted Monday that China will slow the pace to produce 460 million tonnes of crude iron in 2007, up 40 million tonnes on 2006. Exports would drop by 10 million tonnes.

China is the world's biggest producer and consumer of steel, with hundreds of operational steel companies.

(Xinhua News Agency January 10, 2007)