China approves 7.1 million tonnes of new EAF-based steel capacity in first half of the year

Local authorities in China in the first half of this year, according to the Center for Research on Energy and Clean Air (CREA), approved 7.1 million tons of new steel capacity. However, we are talking about more environmentally friendly projects of electric arc furnaces (EAF) based on scrap.

At the same time, in the first half of 2024, the country did not approve a single new project for the production of coal-based steel. This may mean a turning point for the Chinese steel indutstry in terms of stopping new investments in coal capacity.

The researchers note that in this way China is accelerating the transition to “green” production, as it prepares for a new European carbon levy (CBAM).

The country’s efforts to reduce production and recycle more scrap with EAF could reduce carbon emissions from the steel industry by 200 million tons by 2025, equal to all emissions from the EU metallurgical sector, according to CREA.

«As demand for steel in China peaks and more scrap becomes available, there is great potential to phase out coal-based production, representing a significant opportunity to reduce emissions in the next 10 years,» the analysts said.

In a recently released action plan, China’s state planner highlighted the reduction of carbon emissions in the steel sector in 2024-2025. According to him, in general, it is planned to reduce CO2 emissions in the industry by 53 million tons compared to 2023.

In addition, the plan provides for strict restrictions on the export of metal products with high energy intensity, but low added value. This could potentially hold back excess exports from Chinese producers.

According to the mandates of the central government, provincial governments are developing plans to reduce steel production in 2024. Regions with high growth rates in 2023 and January-May 2024 may face strong pressure on this issue. For example, these are Anhui, Guangdong, Guangxi, Fujian and Inner Mongolia. Metallurgical plants operating along the BF-BOF route will suffer the most. Priority will be given to electric arc furnaces.

The Chinese government has also adopted support measures for a faster expansion of domestic scrap supplies in the coming years, including taxation and financial assistance. And the implementation of CBAM has accelerated the country’s efforts to improve carbon accounting measures and include the metallurgical sector in the national quota trading scheme.

As GMK Center reported, China in 2024-2025 intends to reduce carbon emissions in key industrial sectors in an amount approximately equivalent to 1% of the national figure of 2023. The country also plans in 2024 to reduce energy consumption and carbon dioxide emissions per unit of GDP by about 2.5% and 3.9%, respectively.