China, the world's largest producer and consumer of steel, has a long way to go to keep up its promise to cut excessive steel capacity that has led to a crisis in global steel industry.
The task of cutting excessive steel capacity remained arduous as a short-lived price rally could result in steel mills upping production in pursuit of profits and exacerbate the supply glut, officials were quoted as saying by the state-run Xinhua news agency.
China, last year announced plans to cut steel capacity by about 10 per cent -- as much as 150 million tonnes of steel -- in the next few years, with funds set aside to help redundant workers.
The US has been pressing China to reduce its excess steel capacity, which America says is distorting global steel markets.
Steel overcapacity has not been reversed fundamentally and the recent price rally could result in vulnerabilities, the National Development and Reform Commission, China's top planning body said in a statement.
China's steel mills have reported good profits recently as speculators have splurged on higher prices after government pledged to increase spending on infrastructure construction.
Market watchers, however, have warned that the price surge was unlikely to be sustainable, the Xinhua report said.
China aims to slash steel production capacity by around 50 million tonnes and coal by at least 150 million tonnes this year, a key part of the country's supply-side reform.
A ban on inferior steel products and the closure of "zombie enterprises", firms with surplus capacity, are priorities in the excess capacity reduction drive, the NDRC statement said.
Given the obstacles, such as unemployment and debts, the drive cannot be completed in one fail swoop -- it requires resilience, composure and innovation, it added.
Last year, Chinese officials said over 1.8 million jobs were expected to be lost due to over capacity problems in coal and steel sectors.
Last year, China eliminated steel production capacity by more than 65 million tonnes and coal by over 290 million tonnes, both beating government annual targets and ahead of schedule.
Thanks in part to the efforts, China's broader economic growth has shown increasing signs of stabilising since the second half of 2016, with indicators such as factory prices and industrial profits seeing significant improvements, the Xinhua report said.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)