China: Beijing issues 5-year plan for industrial commodity sectors

China has released a five-year guideline spanning 2021-2025 for developing the country's industrial commodity sectors, featuring cleaner, smarter and safer production, promising an optimized industrial structure and improved product quality.

The 26-page document, jointly issued on December 29 by the ministries of industry and information technology, science and technology, and natural resources, is presented as a guide for strengthening key industrial commodity sectors including those of steel, non-ferrous metals, petrochemicals and construction materials in the ongoing 14th Five-Year Plan period.

The total value of output of industrial commodities among all sizable industries in China in 2020 accounted for 27.4% of the total, according to the document. The industrial sectors are facing severe challenges, the guideline stresses, including threats to supply chain security posed by COVID-19 and de-globalization (reduced international exchanges of goods and services), plateauing demand for the key commodities such as steel and aluminum, and the need for all sector industries to achieve the goals of carbon peak and carbon neutrality.

"The task of (achieving) 'green' and safe development of industrial commodities has become increasingly imperative," the ministries emphasized.

China to continue optimizing industrial structure

The guideline made clear that as part of efforts to optimize the industrial structure of the country's steel industry, crude steel capacity cannot increase during the five-year plan and actually, must be cut.

This year, for the first time, the Ministry of Industry and Information Technology (which supervises the steel sector) mandated that China's crude steel output cannot exceed that of 2020, saying this was necessary to reduce emissions of carbon dioxide and other pollutants and to balance domestic steel supply-demand, as Mysteel Global reported. In fact, preliminary estimates suggest that crude steel output this year could fall by 20-35 million tonnes compared with 2021.

Moreover, the guideline advocates that the steel capacity utilization rate must be kept at a "reasonable level" and the industrial concentration in the sector be further enhanced. As part of this, it emphasizes that the steel and aluminum sectors must continue to abide by the country's 'capacity swap' policy - whereby new productive capacity can only be installed if old facilities of equivalent or larger capacity are stopped and scrapped - in order to strictly control installed capacity across the sectors.

Other measures to be employed as a means to curbing capacity expansion of these industries will include controls on the levels of carbon dioxide emissions and other pollutants generated by the sector, and the amount of energy they consume, the guideline stated.

Similarly, to enhance industrial concentration during the five years, the ministries will encourage mergers and acquisitions, including trans-regional and trans-ownership (state-owned and privately-owned) M&As, the document stated. In the petrochemical, steel, non-ferrous and construction materials sectors, the goal is to create 5-10 leading enterprises with core competitiveness and to form over five nucleus of world-class advanced industrial commodity manufacturing clusters.

Green shifts in the key commodities sectors

By 2025, energy consumption and carbon emissions among the key industrial commodity sectors must be reduced notably, the guideline stressed. Specifically, energy consumption per tonne of steel produced must be cut by 2% while carbon dioxide emitted by the aluminum sector needs to fall by 5% by 2025, it said.

The steel sector is asked to continue to promote "ultra-low emission" transformation - a set of requirements on all steelmaking processes implemented since 2019 - and to develop technologies including electric arc furnace-based steelmaking, hydrogen-rich blast furnace-based steelmaking, and carbon capture and storage.

Other industries including coke-making, and aluminum, copper, lead and zinc smelting are asked to formulate and promote their own ultra-low emission standards. These key commodity industries must also decide their own plans for meeting the central government's commitment for China to achieve peak carbon by 2030.

Supply-chain security needs to be improved

During the five years, China will strengthen efforts to identify and develop domestic mineral resources, particularly those where supply is frequently tight, such as iron ore and copper, while preferential tax policies on such mining projects will be implemented.

The central government is also encouraging the establishment of large recycling and processing bases or industrial clusters for steel scrap, secondary aluminum, copper, lithium, nickel and cobalt, the guideline notes.

By 2025, the ratio of steel scrap used in crude steel should reach 30%, while output of secondary copper and aluminum needs to hit 35% and 20% of the total production of the two metals respectively.

The document also called for the digital transformation in these sectors to reduce safety risks and improve operational efficiency. The guideline advocates that by 2025, 70% of the 'key processes' among enterprises in the nominated industrial sectors must be numerically controlled - up from 65.7% by 2020 - and recommends that over 100 'smart' production/manufacturing demonstration plants be established nationwide by 2025, up from just 60 as of 2020.

Written by Olivia Zhang, zhangwd@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.