Banks have been urged to scale back lending to steel mills operating with outdated facilities or contributing to excessive capacity, the South China Morning Post reported. In a note sent to local governments, steel trading groups and large steel mills, the Ministry of Industry and Information Technology also called for industry-wide limits on output, particularly of products with a serious supply glut. China’s steel mills have an annual capacity of around 660 million metric tons, but the ministry believes domestic demand and exports only amount to 462 million metric tons per year. Steel output rose 14% year-on-year to 127 million metric tons in the first quarter, while 65 other steel-making countries produced a total of 136 million metric tons, down 37%. Analysts said the note reflects government concerns that there will be no significant pick-up in steel demand in the short term. Steel prices fell 9% in the first quarter despite a brief rebound in February.