Bloomberg reported that China’s slowing economy and tougher government anti pollution efforts are taking a toll on its steel mills, rattling the world’s biggest producer of the alloy and flashing worries of a potential downturn in the global iron ore trade.

The result is 2% of steel making capacity will be eliminated this year, China’s largest industry researcher. At the same time, steel output will slow to a growth rate of 3% from 7.5% in last year.

The biggest losers may be older, private mills the government considers to be both inefficient and some of the greatest sources of foul air that is causing outrage throughout the nation.

Premier Mr Li Keqiang declared war on pollution at the nation’s top legislature in March, sending a signal that the state isn’t willing to continue to sacrifice clean air for rapid growth.

Moody’s Investors Service said that as smaller mills are squeezed out, bigger ones including Baosteel Group Corporation and Wuhan Iron & Steel Group will win market share.

Mr Hu Muzhong GM of Central Minerals in Hong Kong said that “The government aims to wash out small, polluting producers and it wants a reshuffle of the steel industry.”

Mr Mike Henry president marketing and technology unit of BHP Billiton Limited said that “The anti pollution moves will drive consolidation towards more efficient steelmaking capacity in China.”

Mr Xu Xiangchun chief analyst of Mysteel said said that “Mysteel estimates there are more than 300 mills that have blast furnaces that consume iron ore. This year as many as 10 plants, with annual capacity of as much as 10 million metric tons, may close or scale back operations. That’s enough to create panic in the market. China produced a record 779 million tonnes of crude steel last year.