China's steel production capacity will be reduced to 1 billion tons by 2025

China will continue to close outdated steel mills to bring its total capacity to less than 1 billion tons by 2025, adding that national demand for the metal will gradually decline, according to the president of the country's steel industry association.

China has pledged to close 150-150 million tonnes of annual production in early 2016 in five years to improve the sector's profitability and utilization.

Yu Yong, president of the China Iron and Steel Works Association (CISA) and chairman of the state-owned Hebei Steel Group, said 120 million tons of annual steel capacity had already been shut down.

“Building on China's gains in capacity cuts, China will use techniques such as law, market forces, financial instruments, and mergers and acquisitions to continue to reduce excess capacity,” Yu said, according to a transcript of his speech released Friday by China Metalurgical News, published by CISA.

He said China will strive to maintain its utilization rate at around 80 percent. In 2015, they fell to less than 70 percent.

China intends to shut down another 30 million tons of capacity this year, and has also shut down about 100 million tons of illegal low-grade steel used primarily in construction.

“Going forward, overall steel demand in China will fluctuate and excess potential is likely to persist for a relatively long period of time,” he warned.

China is responsible for about half of the world's steel production, and a huge sector is blamed for poor air quality in northern China, especially in the Hebei province steelmaking center, where Yu's company is based.

But following policy changes and technological improvements, the cleanest steel mills in the world were now located in China, Yu said, adding that CISA members managed to cut energy consumption per tonne of steel by 2.16 percent in 2017.