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Posco, JFE Shares Rise as China Curbs Steel Output

Posco, JFE Holdings Shares Rise as China Curbs Output
Posco advanced as much as 5 percent, the biggest gain since June 21, to 507,000 won and traded at 506,000 won at 12:04 p.m. in Seoul. Photographer: Jean Chung/Bloomberg

Posco, JFE Holdings Inc. and other Asian steelmakers advanced after steel prices in China, the biggest consumer of the metal, jumped amid production cuts.

Benchmark hot-rolled coil prices in China rose 3.5 percent yesterday to the highest in almost four months as steelmakers in Hebei province shut mills after the local government limited electricity supply to reach power efficiency targets.

As much as 25 million metric tons of annual steel capacity may be suspended as local governments seek to meet power targets, Credit Suisse Group AG said last week. Hebei province, the biggest steel producer in the country, will demand that Tangshan Iron & Steel Group, Shougang Corp., and other steelmakers curb output to meet energy targets, according to the Tangshan city government website.

“We believe there are more targeted measures ahead to conserve energy consumption and that both steel prices and equities have further upside from here,” JPMorgan Chase & Co. analyst Nathan M. Zibilich said in a note today. China has cut energy consumption per unit GDP by 15.6 percent between 2006 to 2010, below its target of a 20 percent reduction, he said.

Posco advanced 4.5 percent, the biggest gain since June 21, to close at 504,000 won in Seoul. JFE, Japan’s second-biggest steelmaker, gained 2.4 percent to 2,695 yen in Tokyo. Maanshan Iron & Steel Co. surged 10 percent, the daily limit, to 3.94 yuan in Shanghai trading.

Hebei Curbs

“Investors seem to be betting that Korean mills will benefit from output curbs in China’s Hebei province, which drove prices in China higher,” Park Kee Hyun, an analyst at Tong Yang Securities Inc., said by phone.

Tangshan Steel Group, Tangshan Guofeng Iron & Steel Co., Hebei Jinxi Iron & Steel Co. and 27 other mills in Tangshan city should cut production by a combined 47 percent each month for the rest of the year from the monthly levels of January-to-July, the Economic Information Daily said today. The paper, an affiliate of the official Xinhua News Agency, citied a government document.

“Our new plant in Hebei must meet the environmental standards set by the government,” Wu Jianxin, a spokesman of Shougang, said by phone from Beijing. “It’s facing production cuts probably because it’s a large producer.”

Fu Guanghua, a vice president of privately owned Tangshan Guofeng, said the company may have to cut production at furnaces as well as its rolling mills. Wang Weigang, a spokesman of Hebei Steel, didn’t answer calls seeking comment.

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