Rio and BHP to win from China’s blue-sky wars – by Matthew Stevens(Australian Financial Review – July 5, 2018)

China has moved to further embed pollution controls across a broader sweep of its industrial landscape in a move that reinforces the shared view of Australia’s biggest miners that price premiums being earned by quality iron ore and coal are now enrichingly structural.

A new three-year action plan announced on the official government website more than doubles the number of major cities targeted for pollution with the migration of the regime south beyond the provinces that surround Beijing to the Yangtze delta and Shanghai.

Confirmation of reforms that were first flagged towards the end of last winter’s successful blue-skies campaign acts as reinforcement of BHP’s planned changes to the Pilbara product mix and of Rio Tinto’s pursuit of mining capacity flexibility that will allow it to best respond to China’s increasingly seasonal raw-materials demand pull.

Currently China’s steel industry is producing steel at a monthly run-rate equivalent to 955 million tonnes a year. It is doing that because the anti-pollution regime leaves a window open to maximise production through the summer months.

But that run-rate will not be sustained and by year’s end actual annual production will come in somewhere under maybe 850 million tonnes.

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