China Steel Hub Orders New Output Cuts in Push for Blue Sky

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(Bloomberg) -- China’s top steel-making city is imposing further production cuts beyond the winter heating season as the nation presses ahead with a campaign for cleaner skies that has rattled steel and iron ore markets.

Tangshan City, the country’s steel-producing hub, has ordered a two-tier system of restrictions that will last from March 16 through Nov. 14, according to a statement on the website of the city’s branch of the National Development and Reform Commission, China’s top planning body. Mills closest to the city center will have to halt 15 percent of capacity, while the remainder will need to idle 10 or 15 percent.

While the stoppages affect less than 1 percent of national capacity, Tangshan’s move signals the government’s intent to prioritize clean air over industrial output, said Yu Chen, a Shanghai-based analyst with Mysteel Research.

“It’s more about possible future measures to idle more plants in other parts of the country if air pollution gets severe,” said Yu. The order would idle steel capacity of 9.875 million metric tons, compared with 1.05 billion tons of total capacity in China, according to Yu.

The output limits aim at continuing improvements to air quality, and show the city’s “determination to win the battle for blue skies,” Tangshan NDRC said.

Hebei province, together with several other areas of northern China, ordered cuts of as much as 50 percent on steel production during the winter heating season ending March 15. The unprecedented steps to reduce heavy pollution in the region tightened supplies of steel, boosting prices, and increased the cost of iron ore as mills sought more efficient higher-quality grades.

©2018 Bloomberg L.P.

With assistance from Martin Ritchie, Winnie Zhu

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