{"id":60059827,"date":"2024-11-12T18:04:02","date_gmt":"2024-11-12T18:04:02","guid":{"rendered":"https:\/\/dialogue.earth\/?p=60059827"},"modified":"2024-12-05T15:18:31","modified_gmt":"2024-12-05T15:18:31","slug":"pause-on-steel-projects-shows-challenges-of-chinas-green-transition","status":"publish","type":"opinion","link":"https:\/\/dialogue.earth\/en\/business\/pause-on-steel-projects-shows-challenges-of-chinas-green-transition\/","title":{"rendered":"Pause on steel projects shows challenges of China\u2019s green transition"},"content":{"rendered":"\n

On 23 August, China\u2019s Ministry of Industry and Information Technology (MIIT) issued a notice<\/a> suspending new steelmaking production projects while it reviews a policy that aimed to control overcapacity in the sector.<\/p>\n\n\n\n

The capacity replacement policy, introduced in 2014, required steelmakers to offset new production projects by retiring outdated equipment. As well as easing overcapacity, it was hoped this would modernise equipment and processes, reduce pollution and, since 2020, cut carbon emissions. Its suspension follows mixed results, and raises questions about the future of China\u2019s steel industry.<\/p>\n\n\n\n

Steel production accounts for around 15%<\/a> of China\u2019s carbon emissions. And while the capacity replacement policy has helped phase out older, more polluting facilities, production of crude steel has continued to rise. The suspension could therefore curb overcapacity in the short term, but it also risks stalling essential decarbonisation initiatives, such as the shift towards electric arc furnaces (EAFs), which are less carbon-intensive.<\/p>\n\n\n\n

Tracing the development of Hubei\u2019s steel industry \u2013 China\u2019s leading steel-producing province \u2013 it\u2019s possible to analyse the impact of capacity replacement and what its suspension might mean for the industry\u2019s future.<\/p>\n\n\n\n

The industry is going green, but expansion hasn\u2019t stopped<\/h2>\n\n\n\n

In 2014, the MIIT issued a notice<\/a> on implementing capacity replacement for industries with severe overcapacity, including steel, cement, and aluminium. This was a response to State Council guidance on resolving overcapacity and to its air pollution action plan<\/a>. Over the past decade, the MIIT has published four capacity-replacement policies to guide industry development.<\/p>\n\n\n\n

The steel industry has been a key focus of this capacity replacement policy, with Hebei province playing a central role. As the saying goes: \u201cThe world looks to China for steel, and China looks to Hebei.\u201d In 2023, Hebei produced 210 million tonnes of crude steel \u2013 21% of the nation\u2019s output \u2013 according to the China Iron and Steel Association<\/a>.<\/p>\n\n\n\n

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The capacity replacement policy has significantly shaped the concentration, structure, and modernisation of Hebei\u2019s steel industry. The number of steel companies in the province has fallen<\/a> from a peak of 123 in 2011 to 39 today, with the top 10 companies now accounting for 70% <\/a>of the province\u2019s production capacity.<\/p>\n\n\n\n

Hebei\u2019s industry is structured around transporting steel by rail to seaports for export, with crude steel production concentrated<\/a> in eight main cities \u2013 Tangshan, Handan, Qinhuang Island, Shijiazhuang, Chengde, Cangzhou, Xingtai, and Xinji.<\/p>\n\n\n\n

Hebei has used the replacement policy to phase out outdated production capacity, improve its industrial scale, and enhance environmental performance. By March 2024<\/a>, 37 steel companies had an A-grade environmental rating, and 38 factories met national green standards \u2013 making Hebei a national leader in these areas.<\/p>\n\n\n\n

However, these policies could not curb a steady rise<\/a> in Hebei\u2019s crude steel output. Several years of capacity data show how, from 2011, the province\u2019s production continued to grow rapidly, and that in 2014, 2015, and 2017, the policies were unable to contain this upward trend.<\/p>\n\n\n\n

It was not until 2021, when stricter output control policies were introduced<\/a>, that Hebei\u2019s production started to fall, though it has remained at a relatively high level.<\/p>\n\n\n\n