China will limit annual steel production capacity to not more than 400 million tons during its 11th five-year plan which starts next year, according to the National Development and Reform Commission.

　　In a drive to curb surging investments that cause excessive supply of steel, the country plans to phase out 100 million tons of iron production capacity and 55 million tons of steel-making capacity by 2010, the top economic planning body said in a statement.

　　The steel output capacity in China last year jumped 35 percent to 419 million tons, while another 119 million tons of capacity are planned or under construction.

　　The surging capacity has caused prices to ride like a roller coaster in China this year.

　　In the domestic market, steel prices have been falling since April after hitting a decade-high, thanks to increasing overcapacity and inventories led by soaring investments and imports. The prices slumped sharply in late September, with those of widely used hotrolled steel sheets diving some 50 percent from March's level.

　　The Chinese government has been trying to curb expansion in the industry after steel output doubled in four years, which led to record high prices for iron, which surged 71.5 percent this year.

　　A policy the central government adopted in July encourages more industry mergers and aims to have the top 10 domestic mills account for more than 50 percent of the country's total output by 2010 and 70 percent by 2020.

　　"Steel demand in the country next year will grow at a limited pace as government measures are set to take effect," said Wu Xichun, former chairman of the China Iron and Steel Association.

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