New moves to modernize the Chinese steel industry went into effect on Wednesday with the government's announcement that the outdated steel-smelting ovens of 26 steel firms will be demolished next year.

Under the National Development and Reform Commission's (NDRC) restructuring plan for the steel industry, China will scale back iron and steel production by about 100 million tons in the next five years to eliminate redundant production.

The first group of 26 firms in north China's Hebei Province will cut iron production by 3.98 million tons and steel production by 3.73 million tons.

"The government is determined to make the restructuring run to schedule. If firms on the blacklist fail to follow orders, they will be punished by having their production license suspended and water and power supplies cut," said Guo Dajian, director of the Hebei provincial development and reform commission.

Hebei's crude steel output will reach 90 million tons in 2006, 21 percent of the national total. The NDRC has criticized Hebei's irrational approval of investment in a raft of low-quality projects, describing them as a "blight" on the province.

According to NDRC figures, Hebei has 88 steel makers whose production capacity is only 839,000 tons on average. It also has the worst water shortages in China and local steel makers -- with their huge consumption of water -- are being blamed for this situation.

The province has been ordered to cut iron production by 45 percent and steel production by 27 percent in this round of industrial restructuring.

According to statistics from the the State Information Center, China's crude steel output totaled 36.162 million tons in September, a rise of 18.5 percent year on year and up 2 percent on August.

The China Iron and Steel Association believes that supply and demand in the domestic steel market will be balanced next year, thanks to the government's step-by-step production cuts and buoyant demand for domestic steel.

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