China steel restructuring plans due by year-end

BEIJING, Nov 12 (Reuters) - New plans by the Chinese government to restructure the steel sector are expected to be announced by the end of the year, an official said on Thursday.

The plans would include new consolidation targets, and a renewed effort to eliminate poor-quality steel capacity, said Jia Yinsong, inspector at the raw materials division of the Ministry of Industry and Information Technology.

"We are now drawing up new policies to deal with all the problems in the industry," he told a conference.

China has sought to improve "order" in its fragmented steel industry, with long-standing plans to consolidate the sector under the leadership of its biggest mills.

Jia said a massive new wave of infrastructure projects across China had made the government's task more difficult, allowing smaller and less efficient steel mills to continue making a profit despite the economic downturn and a collapse in steel export volumes.

"Construction steel demand has been so high that it has been harder to eliminate outdated capacity," he said.

He said domestic steel output rose 7.5 percent in the first nine months of the year despite global production falling by a third, leading to concerns overseas about the state of the Chinese market.

"But the increase in domestic production was completely absorbed by domestic demand," he said. "We have also increased imports, contributing to the world steel industry rather than adding to the chaos." (Reporting by David Stanway, Editing by Chris Lewis)