Carbon reduction methods for steel: production reduction and crude steel production restriction

April 21,2023

There is a strong correlation between industrial carbon emissions and crude steel production.

Therefore, in addition to strengthening the deep adjustment of the steel industry structure, limiting the production of crude steel is still one of the most direct and effective regulatory measures to some extent.

In 2014, China's crude steel production reached a peak of 823 million tons, an increase of 5.47 times compared to 2000. In 2015, due to macroeconomic impact, steel production capacity was surplus and prices were competitive, resulting in a decrease in prices. Crude steel production fell to 804 million tons, but still accounted for 49.61% of the global total. At the same time, as of 2015, China's apparent consumption of iron ore reached 1.077 billion tons, accounting for 54.97%, making it the world's largest consumer of iron ore.

In 2016, the steel industry lost 65 million tons of production capacity, causing steel companies to turn from losses to profits, and the industry emerged from a downturn. In 2017, the industry completed its capacity reduction plan ahead of schedule, reducing production capacity by 55 million tons. With the effective elimination of outdated steel production capacity and the improvement of production efficiency and steel quality through the supply side structural reform, the supply-demand contradiction has been significantly improved, the number of enterprises has decreased, and the profit margin has significantly increased. The crude steel production has also broken through from 2017 to 832 million tons, and has continued to grow to a peak of 1.053 billion tons in 2020.

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In 2021 and 2022, driven by the "dual carbon" policy, crude steel production began to decline. As of 2022, the cumulative production of crude steel is still as high as 1.013 billion tons. According to the international average standard, the carbon emissions of 2.15 tons/ton of crude steel are further estimated, and the carbon emissions of China's steel industry in 2022 are as high as 2.178 billion tons. The production of crude steel may still need further reduction.

In 2020, since the "14th Five Year Plan" proposed carbon peaking and carbon neutrality, the Ministry of Industry and Information Technology at the end of 2019 highlighted the implementation of industrial low-carbon action and green manufacturing projects around the target nodes of carbon peaking and carbon neutrality. As an energy intensive industry, the iron and steel industry should resolutely reduce crude steel output to ensure that crude steel output declined year-on-year.

Since July 2021, the monthly production of crude steel has significantly decreased year-on-year, with a year-on-year decrease from 8.4% to 23.3%, continuing until September 2022. The base effect has led to a year-on-year recovery. However, from a cumulative perspective, the cumulative production of crude steel has shown a sustained year-on-year decline since October 2021. The reason for this is that, in addition to the policy of restricting crude steel production since the first half of 2021, it is more likely that the poor real estate economic activity has led to a significant decrease in terminal steel consumption. Although the real estate economic activity data rebounded at the beginning of 2023, there was still a year-on-year decrease. Based on a series of long-term macro backgrounds such as the domestic population and changes in financing environment, the real estate terminal demand, which accounts for over 40% of steel demand, may have peaked, and the trend of gradual decline in crude steel production will continue for a long time, which will be conducive to achieving the "dual carbon" goal.

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Carbon reduction methods for steel: production reduction and crude steel production restriction

There is a strong correlation between industrial carbon emissions and crude steel production.

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