The plan has six goals. The first is to restore iron and steel output to a reasonable level. The output of crude steel is expected to reach 460 million tons in 2009, a decline of 8 percent year on year, and its exports will be kept at 8 percent of the total output. By 2011, the output of crude steel will reach 500 million tons, while the added value of the iron and steel industry will account for 4 percent of the country's GDP.

The second goal is to make breakthroughs in eliminating backward production capacity. Blast furnaces of up to 300 cubic meters as well as converters and electric furnaces with a capacity of less than 20 tons will be eliminated as scheduled. The country will try to eliminate 72 million tons of backward capacity in iron smelting and 25 million tons of backward capacity in steel smelting within three years.

The third goal is to make significant progress in restructuring steel companies. By 2011 several mega iron and steel makers with strong and independent innovative capabilities and international competitiveness will be formed. The top five iron and steel companies will contribute more than 45 percent to the country's total output, and the production capacity of iron and steel makers in coastal areas will make up more than 40 percent of the national total.

The fourth goal is to greatly improve the technical capabilities of iron and steel companies. More than 60 percent of the output of major large and medium-sized iron and steel companies should meet advanced international standards.

The fifth goal is to further enhance the sector's independent innovative capabilities. Steelmakers should improve their technical and equipment levels by introducing new technologies from other countries and making independent innovations. Most of the ordinary equipment should be made domestically, and more than 92 percent of large-sized equipment should be made domestically. Iron and steel companies should try to make breakthroughs in key techniques, energy conservation and emissions reduction, as well as the development, production and technological advancements in high-end products.

The sixth goal is to make marked progress in energy conservation and emissions reduction. In major large and medium-sized companies, the comprehensive energy consumption level per ton of steel should not exceed 620 kg of standard coal. The new water consumption level per ton of steel should be lower than 5 tons. The emissions of soot and dust should be less than 1 kg for every ton of steel produced, and the sulfur dioxide emissions per ton of steel must be lower than 1.8 kg.

Possible turning point

The iron and steel market responded positively after the plan was promulgated on January 14, although its implementation will be greatly influenced by the global financial crisis.

The prices of various kinds of rolled steel have risen and in mid-February, the prices of iron and steel in China climbed 10 percent on average compared with last November.

Li said the adjustment of the country's iron and steel export policies and industrial upgrades will reverse the sector's downturn and steer it in a good direction. In the first quarter of this year, the industry would continue to suffer losses. But with the decline of negotiated prices for iron ore, the digestion of stockpiles, and the rising demand of steel products driven by the 4-trillion-yuan ($584.8 billion) stimulus package, iron and steel companies would resume profitability again in the second quarter, he said.

The plan also received a positive response, because it focuses more on solving problems that may affect the iron and steel industry's healthy development. Excess capacity, low industrial concentration, an unreasonable industrial structure and a lack of natural resources, such as iron ore, coal and water, have long plagued China's iron and steel industry. The support plan provides clear solutions to all these problems, and in particular could fundamentally solve problems of excess capacity, low industrial concentration and unreasonable industrial structure, Li added.

"It is not difficult to see from the support plan that to deal with the impact of the financial crisis, the iron and steel industry should mainly solve its inherent problems by promoting development through structural adjustment," Li said.

The plan has three big benefits, Li noted. First, it will speed up the elimination of backward production capacity. This has been an ongoing goal of the government. A measure it launched in 2006 intended for the country to eliminate 77 million tons of backward production capacity of blast furnaces less than 300 cubic meters by 2010. The new plan raises this elimination standard to 400 cubic meters. If the new policy is strictly carried out, more than 100 million tons of backward production capacity will be eliminated across the country.

At present, China's annual iron and steel production capacity is 660 million tons. Last year's total output was 504.9 million tons, hence more than 100 million tons of the production capacity was wasted. The support plan will eliminate the 100 million tons of backward production capacity, so that the industry's production capacity and output will be balanced.