China said to order steel, aluminum curbs to fight pollution

[BEIJING] China has ordered curbs on steel and aluminum output in as many as 28 northern cities during the winter heating season as it steps up its fight against pollution, according to people with knowledge of the matter.

The cuts include halving steel capacity in four major cities, including top producer Tangshan in Hebei province, according to the people, who asked not to be identified because the matter is confidential.

The other cities are Shijiazhuang and Handan in Hebei, and Anyang in the neighboUring province of Henan.

The plan calls for cuts in aluminum capacity of more than 30 per cent across 28 cities, and by about 30 per cent for alumina capacity, according to the people, who cited an order issued late last month by authorities including the Ministry of Environmental Protection and the National Development and Reform Commission.

The plan doesn't specify which heating season - which typically runs from November to March - will be affected by the curbs, nor a figure for the total capacity involved. A draft of the order circulated in January.

"The cities mentioned in Hebei have 70 to 80 per cent of the province's total capacity," Yu Chen, an analyst with consultancy Mysteel Research, said by phone from Shanghai.

"A 50 per cent cut will lead to huge production losses, which may lead to short-term tightness in steel supply," he said.

"It won't have an immediate impact, though, given the current heating season is ending soon," said Mr Yu.

"The full impact will also depend on the detailed measures taken by local governments to implement the order."

Steel reinforcement bar in Shanghai rose 2.1 per cent to 3,542 yuan (S$727.705) a ton.

"These measures, if well executed, could bring potential upside risk to aluminum, alumina and steel prices in China," analysts led by Jack Shang at Citigroup Inc said in an emailed note. They could lead to a 5 per cent loss in the nation's total aluminum production, 9 per cent in alumina and 3 per cent in steel, the analysts said, assuming a four-month halt.

China is the world's top producer and consumer of the metals. US aluminum producer Alcoa Corp's chief executive officer said earlier that China's aluminum curtailments could be a "game changer" for the market if implemented. Aluminum in Shanghai added 3 per cent, the biggest gain since Nov 10, to 14,180 yuan a ton.

Calls to the environmental ministry's news department weren't answered. The NDRC, China's top economic planning agency, didn't respond to a fax seeking comment. Air pollution peaks in winter due to coal-fired heating.

The plan follows a directive last week in which China ordered steel mills in northern Hebei province and Tianjin municipality to curb output to ensure air quality during the annual parliament meeting in Beijing this month.

BLOOMBERG