China's top steel making province will ban the reopening of steel mills that had been previously ordered to shut down, the official Xinhua News Agency reported on Tuesday, as soaring steel prices lure back producers.
Provincial authorities in Hebei also pledged to step up monitoring of steel mills, punish closed mills that reopen and investigate and sack local officials who allow the reopening of mills and approve illegal projects, Xinhua said.
Hebei accounts for just under a quarter of steel production in China, by far the world's top steel producer and consumer.
A jump in steel prices this year has encouraged many producers in China to rekindle their furnaces and ramp up production, potentially exacerbating a global steel glut that has sparked trade friction with other producers including the United States, Britain and Australia.
Some mills in China have been ordered to close as part of the government's efforts to trim overcapacity. Xinhua quoted a notice from the Hebei government as saying officials were not allowed to permit these facilities to restart production "under any circumstances."
Other mills, facing losses, cooling demand and tighter credit conditions, have trimmed output or suspended production for economic reasons. It was not clear if these mills were included in the ban on resuming production.
Australia said on Saturday it would impose duties on certain types of Chinese steel to protect domestic steelmakers, while the United States and seven other countries called earlier this month for urgent action to address global overcapacity.
Chinese steel futures have jumped more than 50 percent so far in 2016 after six straight years of losses. Dalian iron ore futures have risen about 55 percent since the beginning of this year, as investors bet the government will take more measures to stimulate the economy.
Despite Beijing's efforts to cut surplus Chinese steel capacity and pressure from other countries to cut exports, China's steel output rose to a record in March while its steel shipments rose 30 percent from a year ago.
China has a total crude steel capacity of 1.13 billion tonnes, but produced about 800 million tonnes of crude steel last year, suggesting more than 300 million tonnes of surplus capacity.
The country plans to shed 100-150 million tonnes of domestic crude steel capacity in the next five years, and another 500 million tonnes of surplus coal production, in a bid to tackle huge capacity overhangs that have saddled domestic firms with losses and debts.
