Northern China's Hebei province, the country's dominant steel producing region, is set to move 16 million tonnes of output capacity to the coast in a step aimed at "upgrading" the sector.

According to a document posted on the official local government website, steel enterprises signed an agreement with banks and local governments at the weekend aimed at shifting operations to new port zones.

Moving facilities to the coast has been a major part of a strategy aimed at consolidating China's bloated and fragmented sector.

The Shougang Group, China's fifth biggest steel mill formerly based in Beijing - has already shifted all its production facilities to Hebei's Caofeidian port.

The central government approved a steel industry restructuring plan submitted by Hebei in June, with Hebei vowing to shut, consolidate, upgrade and relocate a sector that had as much as 286 million tonnes of capacity by the end of last year, more than the entire European Union.

Shijiazhuang Iron and Steel, owned by China's biggest steel firm Hebei Iron and Steel Group, has already begun its move to the coast, and others are set to follow.

Seven enterprises in Handan, one of China's biggest steel producing cities, have teamed up to form the Jinan (Hebei South) Steel Group, which will begin its move to the coast soon.

Industrial Hebei has been under pressure to look for alternative sources of growth as the central government fights a "war on pollution", and the province is planning to shed at least 60 million tonnes of capacity over 2013-2017.

But the vice-governor of the province, Yang Chongyong, said at a forum last month that there was no reason why Hebei couldn't produce pollution-free steel in the near future.

"Hebei's steel currently has capacity approaching 300 million tonnes, and the direction of our development should be towards Japan - not a single one of Japan's more than 100 steel mills is a source of pollution and their returns are also great," he said.

The central government is now drawing up plans to integrate the economies of Beijing, Hebei and Tianjin in a bid to improve air quality and ease economic disparities in the region.

The new plan will call for "port-centred" industries like steel to be shifted to the coast, leaving manufacturing to central regions. It is hoped that northern Hebei and Beijing will become an ecological zone and a centre for new green industries.-Reuters