China Ramps Up Push to Make World’s Biggest Steel Industry Green
(Bloomberg) -- China is strengthening efforts to clean up one of the dirtiest corners of its economy, and now plans for its mammoth steel industry to reach peak emissions within four years.
The nation aims to hit peak carbon emissions before 2025, and reduce them by 30% by 2030, according to a WeChat post by the China Metallurgical Industry Planning and Research Institute on Sunday that cited a draft plan. China is also set to release stricter measures around crude steel production capacity and its replacement, the Economic Information Daily reported, citing a person it didn’t identify.
Steel accounts for 15% of China’s carbon emissions, the biggest chunk among manufacturers, and is an important sector to rein in as the country plots its course to a carbon-neutral economy by 2060. Authorities have already implemented a slew of output restrictions and cracked down on steel mills flouting curbs, mainly in the hub of Tangshan, while some of the industry’s giants have outlined their plans to reduce emissions in coming decades.
“We forecast that China will achieve peak steel production rates over the course of 2020 and 2021, as a result of domestic Covid-19 stimulus-backed, steel-intensive infrastructure projects,” said Atilla Widnell, managing director of Navigate Commodities. It is therefore “entirely feasible” that the industry can meet its peak emissions targets before 2025, he added.
Still, policy makers face the challenge of balancing the need to meet a growth target of more than 6% with a vow to roll back its carbon-intensive steel production. Output has hit successive records, and last year topped 1 billion tons for the first time, alongside repeated pledges to rein in excess capacity.
The road to decarbonization is also unclear. Using more scrap metal is limited by its availability, and China’s industry is dominated by blast furnaces, according to BloombergNEF. Carbon capture and hydrogen are other paths forward. While the latter option is backed by Fortescue Metals Group Ltd., the fourth-biggest iron ore exporter, it’s still in its infancy and isn’t yet viable at scale.
Read more on BNEF’s breakdown of the challenges in achieving net-zero steel
“While hydrogen-based steelmaking has been touted as a potential savior for the industry, the economics and, more importantly, the perceived environmental impact are nowhere near -- yet,” Widnell said, adding that the cost of green steelmaking could be significantly higher compared with current production costs, and “it will most likely be borne by the end user.”
China’s green drive has fueled a surge in steel prices, with optimism about demand during the spring construction season adding a further tailwind. Rebar inventories fell for a second week last week, after more than tripling in 2021, according to Shanghai SteelHome E-Commerce data.
Hot-rolled coil futures in Shanghai rose as much as 1.5% to the highest since the contract began trading in 2014, and closed 0.8% higher at 5,372 yuan a ton. Rebar futures were steady near the highest since February 2011.
Iron ore dropped 1% to $156.90 a ton in Singapore by 5:26 p.m. local time, while Dalian prices closed 2.2% lower after jumping 3.2% on Monday.
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