China’s Hebei province has notified 3,785 companies within its jurisdiction to halt or cut production to ensure air quality before a parade in Beijing next month, according to two people who received the notice.
Shares of steelmakers in other provinces, which aren’t affected by Hebei’s notice, rallied.
The parade will be held on Sept. 3 to mark the 70th anniversary of Japan’s surrender in World War II. The affected companies include steel mills, chemical and cement plants, according to the notice from the Hebei Air Pollution Prevention and Control Work Leading Group.
China increasingly relies on production cuts in nearby provinces to ensure blue skies and clean air in the capital city during events that are deemed internationally significant. The nation is the world’s largest steelmaker and Hebei is its largest producing region. The move follows similar cuts made ahead of last November’s Asia-Pacific Economic Cooperation meeting in Beijing.
“The steel industry is already suffering financially as steel demand is contracting in China, so this time the mills are actually quite willing to cooperate,” said Lu Fan, analyst at Sinosteel Futures Co. in Beijing.
Hebei province’s largest mill, Hebei Iron & Steel Co., has had its shares suspended since June. Shares of steel makers in nearby Shandong and Liaoning provinces rallied Monday, with Shandong Iron and Steel Co. jumping by 10 percent, the exchange-set maximum move allowed in a day, and Fushun Special Steel Co. gaining 8.4 percent.
Less than 10 percent of steel mills surveyed by Sinosteel were profitable as of last week, while the ratio of blast furnaces in active use dropped to a record low at 78 percent, Fan said.
Iron ore, the main ingredient for steel, fell on the Dalian Commodity Exchange. Ore for January delivery was down 1 percent at 381 yuan a metric ton as of 3:21 p.m. local time.
Production cuts will be carried out in two phases, said the people, who asked not to be identified because the notice hasn’t been made public. Reductions from Aug. 28 to 31 will affect some 3,213 companies within so-called key areas, while all companies listed in the notice will be affected over Sept. 1 to 4, they said.
The notice is dated Aug. 8 and was sent to companies last week, the people said.
Two calls to the media office at the Hebei Air Pollution Prevention and Control Work Leading Group rang unanswered Monday.
— With assistance by Feiwen Rong, and Steven Yang