COMMENT – Does China’s appetite for steel makes carbon-cutting journey difficult?

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China’s huge appetite for steel, as its economy begins to grow again after a Covid-19-triggered slowdown last year, is making its efforts to reduce its carbon footprint difficult.

As the world marches towards a net-zero carbon emissions, China is getting stuck between its desire for a greener future and an economic turnaround that has sent prices of commodities soaring to record highs

China has promised to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060, but its vast steel industry – the biggest in the world — remains the largest emitter among all manufacturing sectors, accounting for about 15 percent of the annual domestic carbon footprint, state media has reported.

It is, therefore, crucial that the industry play a role in enabling China live up to its carbon-cutting pledges. The ‘how” of the matter remains difficult to define though.

The latest data from the World Steel Association (worldsteel) shows that China’s crude steel output rose 15.6 percent year-on-year to 271 million metric tons in the first quarter of this year, putting a burden on its carbon-cutting undertaking.

The government is aware of the challenge and has been taking steps to reduce crude steel production, with the latest move coming earlier this month when China applied a provisional zero import tax rate on pig iron, crude steel, recycled steel raw materials and ferrochrome.

According to a circular issued by the Customs Tariff Commission of the State Council, the adjustment is expected to reduce import costs, expand steel imports, support domestic producers to cut crude steel output, and guide the industry to cut energy consumption.

Also, export tariffs on ferrosilicon, ferrochrome, and high-purity pig iron would be raised to 25 percent, 20 percent, and 15 percent, respectively.

Industry experts say that the export policy adjustment is necessary because there is no reason to continue exporting numerous ordinary products given China’s highly limited resources.

Many difficult steps

Apart from tightened control over steel production, China is also stepping up efforts to carry out structural adjustments, shut down outdated production facilities and improve energy utilisation rates, according to CISA, the steel industry body.

In fact, Chinese steelmakers have also taken action, with China Baowu Steel Group Corp Ltd — the world’s largest steel conglomerate – announcing in January that it aims to have carbon dioxide emissions peak by 2023, reduce carbon dioxide emissions by 30 percent by 2035, and achieve carbon neutrality by 2050.

To support green development, policymakers have also urged the industry to upgrade its industrial structure and production modes.

According to the 14th Five-Year Plan (2021-25), China will further optimize its raw material sector structure involving petrochemical, steel, and non-ferrous metals and construction materials. Efforts will also speed up the green transformation of such sectors.

However, it is critical that the steel industry continues to make efforts to reduce emissions so that it can continue on a green, low-carbon path for development, and keep improving raw materials, technologies, and energy structures.

Can the industry promote the use of non-fossil energies in the steel industry, particularly hydrogen energy, as part of its effort to break the bottlenecks of low-carbon technologies?

That’s a question that still needs to be answered clearly.

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