[SHANGHAI] Jiangsu Shagang Group , China's third biggest steelmaker, was ordered on Friday to hold a formal investigation into its operations after it was accused by the government a day earlier of failing to rectify breaches in pollution rules.

The Shenzhen Stock Exchange asked Shagang to look into its environmental protection record and fully disclose any violations made by the firm or its subsidiaries.

China completed a probe into thousands of environmental violations throughout its 31 provinces and regions last year, and in recent weeks it has been reviewing how the problems have been rectified.

The massive steel sector is one of the country's biggest sources of smog and solid waste, but while standards in the industry are now among the world's toughest, regulators have struggled to enforce them.

The probe has already uncovered dozens of examples of "perfunctory", "superficial" or "fraudulent" rectifications, with authorities also accused of responding too slowly to complaints and taking damaging "short cuts" in order to resolve problems.

Last year, Shagang, China's largest privately-owned steel producer, was found to have dumped millions of tonnes of untreated industrial waste, including slag from steel production, in landfills near the banks of the Yangtze river, contaminating nearby soil and water.

The firm, which produced 38 million tonnes of crude steel last year, was also fined for violating emissions standards at its boilers and coking coal plant.

But despite receiving administrative orders and fines, Shagang had failed to tackle its problems, the Ministry of Ecology and Environment said on Thursday.

"The Shagang Group is a listed company with.. annual sales exceeding 200 billion yuan (S$41.33 billion), but it failed to take up responsibility for ecological protection," it said.

The slag dumped by Shagang and another steel firm in the city of Zhangjiagang in Jiangsu province was in excess of 2.3 million tonnes, it said, adding that it would conduct further investigations into potential lapses by local authorities.

The Shenzhen exchange asked Shagang to clarify if the violations affected the firm's listed unit, and whether or not it had breached disclosure rules.

Officials with Shagang did not respond to requests for comment, but in a statement to the official China Daily newspaper, the firm promised to invest 2.14 billion yuan to rectify its emissions control failures, and would also cut slag by half by the year-end.

REUTERS