On May 5, at the meeting of China's State Council about energy savings and emission reductions, prime minister Wen Jiabao stated that the Chinese government will adopt an ‘iron fist' policy as regards the elimination of backward industry production capacities.
According to the meeting, this year 25 million mt of iron production capacity and 6 million mt of steel production capacity are to be eliminated in China. By the end of May, lists are to be published with the names of the concerned enterprises and operations of the relevant backward capacities are to be stopped before the third quarter.
The measures come at a time when the Chinese steel industry is facing lower profit margins, lack of activity in mergers and restructurings, and a loss of advantage in iron ore negotiations. Analysts say that these factors have forced the government to take the course of action in question.