China to accelerate decommissioning of obsolete steel capacities

The country has published an action plan for sustainable improvement of air quality

China’s State Council recently published an action plan to improve the country’s air quality as part of its efforts to promote quality economic development, SteelMint reports. In particular, it refers to the need to accelerate the elimination of old facilities in key industries, including steel.

According to the plan, by 2025, the density of suspended particulate matter PM2.5 in Chinese cities at the prefectural level and above should be reduced by 10% compared to 2020, and the number of days with severe air pollution should be kept within 1% annually. Emissions of nitrogen oxides and volatile organic compounds should be reduced by more than 10% by the specified period compared to 2020. The document also defines the relevant indicators for key regions (in particular, Beijing-Tianjin-Hebei and surrounding areas).

The plan states that the blind launch of projects with high energy consumption and high emissions will be decisively stopped. The country will ban the construction of new steel production facilities, accelerate the decommissioning of outdated facilities in key industries, including steel, and promote the development of environmentally friendly production.

China will continue to encourage the development of electric arc furnace (EAF) steel production to reduce carbon emissions. According to the plan, their share should reach 15% of the total by 2025.

The country will also promote the qualitative transformation of ultra-low emission industries in key sectors such as steel, cement, coke and chemicals, and coal-fired boilers. According to the plan, by 2025, more than 80% of China’s steel capacity in China should meet the ultra-low emission targets, and steelmakers should achieve ultra-low emissions in key regions.

The plan also emphasizes the transition to new and clean energy. The plan states that by 2025, the use of non-fossil energy sources will account for about 20% of the country’s total energy consumption. Natural gas production and supply will also increase.

«New measures to limit capacity are important and necessary given the expected decline in steel consumption in China. The local industry is not efficient enough in finding a balance between supply and demand. Overproduction and high exports persist despite a long period of loss-making operations,» said Andriy Tarasenko, Chief Analyst at GMK Center.

China’s steel production is likely to grow for the first time in three years in 2023, as problems in the real estate sector will be offset by strong car production and export growth. This forecast is made by columnist Clyde Russell in his column for Reuters.

According to the China Iron and Steel Association (CISA), in November, steel production amounted to about 76.3 million tons, bringing the total volume for 11 months to about 951 million tons. If we assume that steel production in December will be at least 75 million tons, the analyst notes, the annual volume is likely to be about 1.026 billion tons (in 2022 – 1.01 billion tons).

The country’s steel production has been above 1 billion tons since it first crossed this mark in 2020 (a record 1.053 billion tons). After achieving this result, Beijing set an unofficial goal that annual steel production should not exceed the previous year’s figure.

As GMK Center reported earlier, n January-November 2023, Chinese steel companies increased exports of steel products by 35.6% compared to the same period in 2022, to 82.66 million tons.