The State Council, China's cabinet, plans to cut 80 million metric tonnes of steel production capacity in five years, which is aimed at improving air quality and helping an industry hit hard by destructive competition.
Mr Li Xinchuang head of the China Metallurgical Industry Planning and Research Institute said that "China should not add any single new steel project for any reason.'
He called the ban a must in order to help the environment and put an end to the unfair competition caused by steel mills that haven't installed emission-reduction equipment.
To achieve the target, Hebei province, the largest steel producer in China, will cut steel capacity by 60 million tonnes by 2017, which means that one-third of the province's steel capacity will be shut down by then.
The local government said on Tuesday that its goal is to reduce 15 million tonnes of crude steel capacity in 2014.
Ms Lu Huaying, an analyst with Lange Steel Information Research Center said that "Hebei will destroy blast furnaces and cut the power supply to production lines that are tapped for shutdown, which means the steel companies cannot put them back in production again.'
She said the central government has been encouraging companies to save energy and cut emissions for years, but the temporary measures resulted in failure when steel mills started to produce again after authorities' checks.