(Bloomberg) -- China’s steel industry is considering paying firms to shutter outdated steel plants, amid government efforts to rein in the country’s mammoth output.

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Qian Gang, chairman of Citic Pacific Special Steel Group Co., said the industry is planning on setting up a compensation scheme for closing older and less efficient capacity, according to a report from local media outlet Jiemian, which cited remarks made on Thursday at the company’s earnings briefing.

The report said the China Iron and Steel Association, which represents steelmakers, began consulting with mills earlier this year on the plan.

A representative for Citic Pacific couldn’t confirm the chairman’s comment. A CISA spokesperson didn’t respond to a request for a comment. The report didn’t specify who would pay the compensation nor at what stage the discussions were at.

China’s economic planning agency pledged earlier this month to push steelmakers to reduce production, in a bid to ease a massive glut and restore profitability at mills. The industry has been one of the worst-impacted by the property market’s downturn.

The market has speculated that cuts of as much as 50 million tons could be mandated. Output in the world’s biggest producer and consumer of the alloy has stubbornly remained above 1 billion tons despite Beijing’s efforts to guide it lower.

--With assistance from Winnie Zhu.

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