Top China steel city orders mills to cut output to clear air

SHANGHAI (Reuters) - China's top steelmaking city of Tangshan has ordered mills in and near the area to cut production for five days from Friday to ease air pollution, according to a notice from the local government. It was not clear how much capacity is affected but Tangshan is the biggest city in Hebei province, which accounts for more than 20 percent of China's steel output. Shanghai rebar futures jumped 3 percent on Friday, pulling away from a recent 12-week low, and hot-rolled coil rallied nearly 5 percent, although an analyst said the gains were mainly a reaction to recent price falls. The Tangshan government ordered industrial plants to cut production between May 27 and 31, while construction projects and open-pit mines were told to stop work completely, to improve air quality, according to a notice from the local government on Thursday obtained by Reuters. Tangshan will also step up dust removal and send teams to oversee key roads, as well as penalising any erring companies and government agencies. The order covers steel mills as well as plants that use cement and coal. Richard Lu, analyst at CRU consultancy in Beijing, said the rise in steel prices was due largely to "an oversold market", rather than the output cuts in Tangshan which will last only a few days. "Price have dropped significantly and very rapidly so it's quite reasonable to have some kind of upward adjustment," he said. (Reporting by Ruby Lian in Shanghai and Manolo Serapio Jr. in Manila; Editing by Richard Pullin)