China has orders steel mills in more cities in northern China to cut production from Nov. 15 to March 15 next year, in order to clear the smog-blanketed sky in the region and to ensure the achievement of the country's steel output reduction target.

Steel mills should keep to their plans to cut production for the remainder of this year to ensure output is no more than last year, according to a statement jointly issued by China's industry ministry and environment ministry on Wednesday. Over the first eight months, China already produced 733.02 million tonnes, up 5.3per cent on year.

From Jan. 1 to March 15 next year, mills are to curtail output by no less than 30per cent of steel production versus 2021.

The order will cover steel mills in its pollution campaign focused on 28 cities in the capital city Beijing and nearby regions, as well as another eight cities in Shandong and Hebei, which altogether churned out more than 40per cent of China's total crude steel output in 2020, National Bureau of Statistics data showed.

China, the world's biggest steel producer, has pledged to limit crude steel output this year at no higher than the 1.065 billion tonnes it made in 2020, as the country vowed to curb expansion of high-polluting and high-energy intensity sectors, including steel, amid its climate targets.

Steel mills in the regions, especially those with blast furnaces, will be ordered to trim production based on their emission levels. While mills using electric arc furnaces can take voluntarily measures to reduce emissions, but will have to make sure their steel output is no higher than the same period a year earlier.

"Local governments are encouraged to fulfil the task by offering economic supports (to the firms)," said the statement, adding local authorities are responsible for ensuring that production equipment is shut and the output cuts are enforced.

China's iron ore imports in September fell 12per cent on year, as steel output controls restrained consumption of the steelmaking raw material.

Meanwhile, the environment ministry also plans to include more cities in its 2021 winter air pollution campaign, in light of the Winter Olympics in Beijing and the nearby city of Zhangjiakou in early February in 2022.

As a result, steel price has been going up higher and higher. The steel price chart below shows that steel price has gone up from 3,500 RMB to 5,590 RMB in the last 12 months. It has gone up about 60% in 12 months.

Hiap Teck should benefit

During the last quarter of 3 months, Hiap Teck’s Kelang factory was shut down for 2 months and its 35% associated Eastern Steel Sdn Bhd was shut down for 1 month. Despite these shutdowns, Hiap Teck could still report record annual net profit of Rm 163 million which is the highest in the last 9 years. 

Based on the above facts, Hiap Teck and its 35% associated Eastern Steel Sdn Bhd should make more and more profit. 

Many investors can foresee that Hiap Teck’s profit for the next quarter ending October, will be another record high. That is why its share price has been going up to form a cup and handle price chart which indicates a very bullish up trend.