The Chinese government, battling severe over-capacity and high pollution levels in the country's steel industry, plans to eliminate mills with a capacity of less than 1m tonnes per year, according to a draft policy document released yesterday.

China's Ministry of Industry and Information Technology also said it will force mills that do not meet environmental standards to upgrade equipment or lose their licences. Mills should not use more than 92kg of coal and 6 tonnes of water for each tonne of steel produced. Waste water emissions should not exceed 2 cu m per tonne of steel produced, and sulphur dioxide emissions should also be limited to 1.8kg per tonne of steel. “Those enterprises with no hope of rectification must gradually withdraw from steel production,” the document said.

Banks should not extend credit and government departments must not issue iron ore import permits to mills failing to meet the new requirements, the ministry said in the proposal open for public comments.