context: Steel production lies at a critical juncture: high demand from construction and industrialisation is unlikely to abate given the government’s economic priorities, yet addressing the industry’s severe environmental footprint is also necessary to achieve national carbon pledges. Steel prices will rise as repeated instructions from authorities to limit steel production are eventually enacted.
A draft carbon peaking action plan for the steel industry, responsible for 15 percent of the nation’s carbon emissions, has been drawn up, as announced by China Iron and Steel Association on 17 Jul 2021. The plan, as yet unreleased, details that emissions reductions will mainly be achieved by
- directly reducing output
- phasing out old units
- clearing overcapacity
- optimising processing
- increasing proportion of steel produced in electric furnaces
- currently only 10 percent of domestic steel is from electric furnaces, far less than the 30 and 40 percent proportions of Japan and the EU respectively
- increasing proportion of steel produced in electric furnaces
- increasing the proportion of short-process steelmaking (using scrap steel inputs)
- increasing market concentration
Details of the plan have not been released, but insiders predict that it will aim to
- achieve carbon peaking by 2025
- reduce emissions by 30 percent by 2030
- achieve significant emissions reductions by 2035
- achieve complete decarbonisation by 2060
Since December 2020, MIIT (Ministry of Industry and Information Technology) and NDRC (National Development and Reform Commission) have been calling for steel production to decline y-o-y in 2021. However, high demand has led to an 11.8 percent y-o-y increase in steel production in the first half of 2021, making the task of reducing capacity all the more difficult, according to Zhao Penggao 赵鹏高 NDRC Resource Conservation and Environmental Protection Office deputy chief. The government may impose stronger measures in 2021 to reduce capacity, he warned.
Many of the steel industry’s environmental problems arise from low market concentration, says Li Xinchuang 李新创 Metallurgical Industry Planning and Research Institute chief engineer. Mergers and reorganisations are likely, he added. NDRC will encourage these structural adjustments and introduce strict rules to ban capacity increases, commented Zhao.