Posted on 08 Aug 2017
Shares in steel and resource companies from China to Europe advanced Monday on the news that a leading Chinese steel-producing region was acting to curb winter output.
Shanghai-listed Baoshan Iron & Steel, China's biggest steelmaker, gained as much as about 8%, while Maanshan Iron & Steel climbed as much as 9% or so here to touch a roughly six-year high. Shanghai-listed steel futures jumped, mirroring the gains by steel stocks.
Hebei Province said Friday that it would limit steel production at major sites during the cold-weather season to half of typical levels. The aim is to reduce air pollution from the burning of coal, a vital resource for making steel but also for heating Chinese homes.
China has long struggled with choking air pollution in winter, and cutting steel output could prove easier than telling people to turn down the heat. Hebei had 260 million tons of steel capacity in 2016, accounting for roughly 23% of the national total, Chinese media report.
As the world's biggest steel producer, China has drawn criticism for the destabilizing effect of its production policy on global supply and demand. The country reached its annual target for cutting excess steel output capacity at the end of June, the official Xinhua News Agency reported in July. Any further reductions will be felt far and wide.
Shares in Posco, South Korea's largest steelmaker, rose Monday, as did London-listed resource groups Anglo American, Glencore and Rio Tinto.
Joshua Mahony, market analyst at online trader IG, said in a note that the new Chinese regulations over capacity curbs in the winter mean that "buyers are now pushing their demand forward somewhat," which is driving Chinese steel futures to their highest level in more than four years and pushing up iron ore prices as well.
The mining sector is benefiting from "stronger iron ore and steel prices," Mahony wrote.
Hebei announced similar production curbs on aluminum, sending shares in Aluminum Corp. of China sharply higher on the Hong Kong and Shanghai exchanges.
