China's largest steel city will continue to restrict production until November

The Chinese steel city of Tangshan has proposed new production restrictions once the current restrictions end in March to improve air quality. It will also provide solid steel prices.

Tangshan is the world's largest steel city, producing more rolled steel than the United States in one year. Efforts to clean up the city's air by lowering production should support steel prices and restrict supply to the country for the rest of the year.

According to a February 12 government proposal, the city's factories will continue to restrict production for 244 days from March 16 to November 14.

The expanded blast furnace restrictions will cover 9.875 million tonnes of steel production capacity, according to the project, which is still under consultation and may be revised.

Plants in the main city, including Tangsteel, a division of the Hebei Iron and Steel Works (HBIS) Group, and the privately held Tangshan Guofeng Iron & Steel Co Ltd, will be scared to cut production by as much as 15 percent.

Other Tangshan factories will cut production by 10 percent, but this could be increased if air quality deteriorates. Mills that have not received a license to discharge pollutants will have to stop production.

The broadening of the restrictions, while anticipated by the market, pushed Chinese rolled steel futures up nearly 4 percent on Monday to its highest level in nearly three months.

China has ordered 28 northern cities to cut steel production by half during the winter heating season from November 15 to March 15 as part of its anti-pollution campaign.

Tangshan in Hebei Province of China was awarded as one of the 10 most modern cities in the country by the Ministry of the Environment last year.

Hebei produced 191 million tons of steel last year. Tangshan accounted for more than half.