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Australian aluminium stocks are up sharply following reports China plans to curb output of aluminium and steel producers and limit coal use in an effort to reduce smog.

Higher prices resulting from Chinese supply cuts would likely be enjoyed by producers elsewhere.

In an effort to bring Beijing’s smog problem under control, authorities have ordered steel and aluminium producers in 28 cities to cut their winter output and floated plans to reduce coal use in the capital, Reuters reported, citing a joint statement from multiple national-level ministries and regional governments.

South32, the BHP spin-off, was up 10.4 per cent in lunchtime trade in Sydney, while Alumina was up 9.3 per cent. The two stocks gained by as much as 11.5 per cent and 11.2 per cent, respectively, in early trade.

On Wall Street on Wednesday, Alcoa closed 9.8 per cent higher on reports of the output cuts. The price of aluminium closed 1.3 per cent higher at $1,949 a tonne on the London Metal Exchange overnight.

Aluminium producers must cut capacity, according to the statement, as well as production of the key input alumina, by more than 30 per cent across 28 cities. Reuters estimated the measures could cut annual aluminium output by 17 per cent, and steel output by 8 per cent.

The government has also called for steel producers in the four northern provinces of Hebei, Shanxi, Shandong and Henan, as well as Beijing and Tianjin, to halve output during the peak winter heating months, which stretches from late November to late February, the news agency said.

Copyright The Financial Times Limited 2017. All rights reserved.
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