Beijing Shougang steel company, one of the capital's worst polluters, will close a key production plant early next year in time for the Olympics, a company source said on Saturday.

Long-suffering Beijingers have been looking forward to the closure and transfer of Shougang's activities for years.

A leading culprit in Beijing's shocking air pollution, Shougang - a historic industrial plant built in 1919 just 17 kilometers west of Tian'anmen Square - started to relocate production in 2005 to Caofeidian, a site in Hebei Province.

Shougang is building a 67.7-billion-yuan (US$8.68 billion) steel works at the Caofeidian deep-water harbor. The company is the only Beijing-based blast-furnace steel maker.

No. 3 Steel Plant, which came on stream in 1992 and has an annual production capacity of three million tons, will be the first group plant to completely halt production, said Huo Guanglai, deputy secretary of Shougang Communist Party of China Committee.

The steel company will move all its Beijing-based production facilities to Caofeidian by 2010.

The company had already started to reduce production in Beijing, closing a two-million-ton production facility and a furnace with a capacity of 700,000 tons.

According to a plan approved by the State Council, China's cabinet, it will maintain production capacity of four million tons during the 2008 Beijing Olympics, but its operations will have to conform to strict government guidelines, according to the company.

The Chinese government promised to make Beijing an "ecological city" with "green hills, clear water, grass and blue skies" after it won the 2008 Olympics bid.

Construction of the company's new steel plant began in Caofeidian in March.

The new plant, a joint venture of Shougang and Tangshan Steel and Iron Group, will adopt environment-friendly technologies to minimize toxic emissions and waste discharge.

It is destined to become the country's largest steel-production base.