The mainland's steel industry capacity may peak this year, after Beijing launched a campaign to cut pollution and upgrade technology, analysts say.
While it may be easy enough to cut capacity, some observers say Beijing faces more complex challenges, including ensuring that such efforts lead to a cleaner environment. The government must also relocate workers who lose their jobs.
Helen Lau, an analyst with UOB Kay Hian, predicts steel capacity this year will be about the same as last year's 1.05 billion tonnes but could start dipping next year. About 70 per cent of the capacity is used, below the world average of 76 per cent.
Despite this, Lau says the government will have to consider the economic impact while planning the pace of production cuts.
"This will be a tough choice - whether you want to stabilise jobs or you want a bluer sky," she says. Closing steel mills also might cause loans to sour and hurt banks, as well as industries the feed into, and benefit from, steel production.
China produced 779 million tonnes of crude steel last year, or 48.5 per cent of the world's total, up about 400 million tonnes from 2005.
As China expanded production of materials such as steel, cement and aluminium in the past decade, the world's largest carbon emitter now is faced with clearing smog and polluted underground water.
The country's challenge echoes London's plight in the last century.
The "Great Smog" plagued London for five consecutive days in December 1952, causing the premature death of up to 4,000 people within four days, and sickening 10,000 more. It took London about 30 years to significantly clean the environment.
Beijing plans to shut off 15 million tonnes of both steel and iron refinery capacity, in addition to cutting cement and panel glass output by the end of next year. This is being done to ensure that all cities meet tough national air quality levels by 2030.
The realisation of such ambitious goals will depend on "how strong the leadership's political will is and how aggressive actions are taken," says Huang Wei, a climate energy campaigner at Greenpeace.
Some observers cautioned that some of the shuttered steel mills may not be those spewing the most pollution. "Some furnaces might be relatively small, but their technologies may not necessarily be outdated," says an official at the China Iron and Steel Association (CISA).
Local governments have been shutting blast furnaces below 400 cubic metres. But the CISA official says climbing steel output indicates that some larger furnaces might have been added in the past year.More on this: