Steel and iron ore prices rose to year-to-date highs on Monday after China’s top steel-producing region announced it would extend winter production curbs intended to cut air pollution.

Tangshan steel mills were forced to cut production by up to 50 per cent beginning late last year as part of a campaign against air pollution. Production limits are also aimed at squeezing out excess capacity in China’s steel and coal sectors, which has led to poor profitability and rising debt at so-called “zombie enterprises”. 

The local government in Tangshan, China’s biggest steelmaking city, said on Friday that it would maintain production limits scheduled to expire when the winter heating season ends in March. An extension of the cuts would reduce steel supplies just as construction demand picks up amid warmer weather.