China plans to reduce about 53 mnt of steel industry CO2 emissions by 2025

• State Council releases Energy Conservation and Carbon Reduction Action Plan
  
  
• EAF's share in steelmaking to reach 15 mnt by 2025
  
  
• Scrap utilisation to touch 300 mnt, standard coal use to drop 20 mnt
  
  

Morning Brief: China's State Council has released the "Energy Conservation and Carbon Reduction Action Plan" for 2024-2025 aiming to reduce energy consumption and carbon dioxide emissions per unit of GDP by approximately 2.5% and 3.9%, respectively, in 2024.

The Plan chalks out the energy conservation and emissions reduction targets for the key sectors of the economy ranging from power, transport and construction to iron and steel and the non-ferrous metals, as well as chemicals and petrochemicals. In absolute terms, it proposes a reduction of around 53 mnt of CO2 emissions from the steel industry by 2025.

Energy transition

Both in 2024 and 2025, energy conservation and carbon reduction transformations in key sectors and industries are expected to result in a reduction of around 50 million tonnes (mnt) of standard coal and a decrease in CO2 emissions by around 130 mnt.

It states that by the end of 2025, the proportion of non-fossil power generation in the country will reach about 39%, while strict and reasonable control of coal consumption in key areas for air pollution control, focus on reducing non-power coal use, promoting the shutdown and integration of coal-fired boilers and clean energy substitution for industrial kilns will be prioritised. By end-2025, coal-fired boilers and various coal-fired facilities with a capacity of 35 t of steam per hour or less will be eliminated.

BigMint decodes the CO2 reduction plan for the Chinese steel industry, as proposed in the Action Plan.

Reducing steel industry's CO2 footprint

• Regulating steel output, capacity: Steel production capacity replacement, prohibiting the addition of steel capacity in the name of mechanical processing, casting, ferroalloys, etc., and preventing the resurgence of "illegal steel" production capacity will be key. Implementation of crude steel production control in 2024 is an imperative. Regions that lag behind in energy conservation and carbon reduction targets in the first three years of the 14th Five-Year Plan shall not add new capacity in the last two years of the 14th Plan.
  
  
• Rising EAF share: The focus is on promoting the recycling of scrap steel and supporting the development of electric furnace short-process steelmaking. By end-2025, the proportion of electric furnace steel in total crude steel output will be increased to 15%, and the utilisation of scrap steel will reach 300 mnt. Hydrogen metallurgy projects will expectedly gather momentum in the coming years.
  
  
• Energy efficiency strategies: Comprehensive utilisation of blast furnace top gas, coke oven gas waste heat, and low-grade waste heat and promoting process connection technologies such as one-pot molten iron, hot charging and hot delivery of ingots are absolutely necessary to reduce the footprint of conventional primary steelmaking.
  
  
• Industry & product adjustments: It will be necessary to adjust the steel product structure, develop high-end steel products such as high-performance special steels, and strictly control the export of low-value-added basic raw materials. The Plan supports promotion of the integrated layout of steel, coking, and sintering to significantly reduce independent coking, sintering and hot rolling enterprises.
  
  
• 53 mnt CO2 reduction by 2025: By end-2025, the proportion of production capacity above the energy efficiency benchmark level in the steel industry will reach 30%, and production capacity below the energy efficiency benchmark will complete technical transformation or be eliminated. Compared with 2023, the comprehensive energy consumption per tonne of steel will be reduced by about 2%, and the self-generation rate of waste heat, pressure and energy will increase by more than 3 percentage points. From 2024 to 2025, the energy conservation and carbon reduction transformation of the steel industry will save about 20 mnt of standard coal and reduce CO2 emissions by about 53 mnt.
  
  

Outlook

As per CISA estimates, CO2 emissions in China's steel industry increased by over 7% in 2023 as crude steel production increased by 0.6% y-o-y. Production and capacity control in 2024 may see emissions decreasing. Also, fixing absolute CO2 reduction targets for the steel industry suggests that steel-related emissions may fall from here on well before the carbon peaking schedule of 2030.

However, 53 mnt of CO2 reduction from the steel industry by end-2025 might appear to be insignificant considering that China's emissions comprise around 60% of global steelmaking emissions-roughly over 2 gigatonnes (gt) or 2,000 mnt of CO2 per annum. Therefore, the transition will only be incremental and slow.