FB Pixel no scriptHas China’s steel sector set the blueprint for industrial decarbonization? | KrASIA

Has China’s steel sector set the blueprint for industrial decarbonization?

Written by Jeff Chay Published on   3 mins read

China’s steelmakers are making significant strides in reducing emissions through technological advancements and industry collaboration.

China’s steel industry, which accounts for around 15% of the country’s total emissions, is making significant strides in its decarbonization efforts by focusing on the development of green steel products and forming international partnerships to reduce emissions across the value chain.

Major steelmakers like Baowu, Hesteel (formerly known as HBIS), and Ansteel are investing heavily in electric arc furnaces (EAFs) instead of coal and iron ore for power generation. EAFs use electricity, which can be sourced from renewable energy, to melt scrap steel, cutting out the energy-intensive process of converting iron ore into iron. According to an independent study conducted by CRU Group and published by the Steel Manufacturers Association, scrap EAFs can reduce direct CO2 emissions by up to 75% compared to the traditional blast furnace process.

China aims to have 15% of its crude steel production from EAFs by 2025, up from the current 10%. However, the viability of EAF-based steel production is contingent on the availability of high-quality scrap steel, as well as the cost and availability of renewable energy inputs.

Direct reduced iron (DRI) may be used as a supplementary raw material in the EAF steelmaking process. DRI is produced by directly reducing iron ore using reducing gasses like carbon monoxide and hydrogen derived from natural gas. In the absence of high-quality scrap, lower-quality scrap can be mixed with DRI to enhance the quality of steel produced via EAF.

As DRI-based EAF, while emitting less CO2 than blast furnaces, still requires natural gas as a primary input, deriving hydrogen from renewable energy sources such as wind and solar instead of natural gas is touted as a promising way of eliminating fossil fuel use in steel production.

China is already making overtures into green hydrogen-based steelmaking, with pilot projects led by companies like Baowu and Ansteel currently underway.

Partnerships between Chinese steel companies and global mining firms also play an important role in accelerating decarbonization efforts. For example, Baowu signed a five-year partnership with mining giant BHP in 2020 to collaborate on efforts to reduce greenhouse gas emissions throughout the steel industry value chain.

According to the State Council’s 2024–25 carbon reduction emission plan, China will strive to reduce carbon dioxide emissions by 3.9% for every unit of GDP over the next year, accounting for a total of about 260 million tons of carbon dioxide over the next two years.

In April 2024, Bloomberg reported that China would offer funding of up to RMB 100 million (USD 13.8 million) for emission reduction projects across sectors like steel and data centers. This initiative by the National Development and Reform Commission (NDRC) aims to accelerate progress in emerging emissions reduction technologies and drive decarbonization in key industries.

However, the National Energy Administration is wary of rapid expansion because the country’s investment in energy storage and grid interconnections has not kept pace with the rapid growth of renewable energy.

As a result, solar farms are increasingly being forced to disconnect to prevent overloading the grid, resulting in an 8% decline in power generated from the average solar panel in 2024 compared to 2023. Such inadequacies exacerbate the volatility inherent in renewable energy sources such as solar and wind power, making it difficult to balance supply and demand effectively over prolonged periods.

While the State Council has called for “eliminating” coal-powered facilities by 2025, China has paradoxically been one of the few places where coal production has increased over the past few years. Global Energy Monitor reported that China increased its coal capacity for the fifth consecutive year in 2023, reaching 408 gigawatts—more than double of the capacity driven by the rest of the world, which stood at 170 GW.

According to Xinhua, Sinopec expects China’s coal sector to stop growing by 2025, with renewable sources projected to overtake coal as the country’s dominant energy source by 2045.

As China’s steel industry slowly transitions away from coal toward greener technologies such as EAF and hydrogen, other highly pollutive industries such as cement and petrochemicals should follow suit in leveraging technological innovation and industry collaboration to drive decarbonization.


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