CHINA has released tighter standards on environmental protection, energy consumption and production capacity for steel producers to meet in a further move to shut down small and outdated mills after it stopped approving new capacity and suspended credit lines.

The government wants to curb reckless output expansion in order to meet its goal to reduce emissions and energy consumption, industry watchers said.

Mills whose crude steel output capacity was less than 1 million tons last year will be closed, the Ministry of Industry and Information Technology said yesterday in a statement on its website.

The ministry also requires that steel mils should not discharge more than 2 cubic meters of waste water for every ton of steel produced. For every ton of steel made their emission of dust and sulfur dioxide should be within 1 kilograms and 1.8 kilograms respectively.

Producers that do not meet the standards will be urged to rectify and failure to do so will see them forced out of the industry. Mills that do not meet the new standard will not be offered new iron ore resources, land, credit support and production licenses.

"Some steel producers are already making losses in the face of expensive raw materials and lower steel prices," said Li Yizhong, minister of industry and information technology. "If effective measures were not taken (to rein in the excessive capacity expansion), the hard-won industry recovery will be wasted."

Crude steel output in the first five months of this year jumped an annual 23.8 percent to 269 million tons. Even as supply has already exceeded demand fixed investment in the industry to expand capacity in the period rose 13.8 percent to 135.6 billion yuan (US$20 billion), making it more difficult to cut emissions and adjust the industry structure.

"The annual production is expected to hit a record 620 tons to 630 tons, up 10 percent from last year," Li said.

Zhang Ping, an analyst with Umetal.com, said most of China's small and medium steel producers may face the risks of being closed.