China must drastically slash its steelmaking capacity over the next five years to meet its green energy goal, as the nation’s dependence on coal is being exacerbated by increased tariffs on a sector that already faces excess capacity.
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China’s coal-based blast furnace (BF) capacity must be reduced by at least 200 million tonnes per annum (Mtpa) by 2025, from 2020 levels, according to the Centre for Research on Energy and Clean Air (CREA).
That is about 15 per cent of China’s steelmaking capacity, equal to the total capacity in the European Union, according to research. Another 150 Mtpa of reduction would be needed from 2026 to 2030, the organisation said.
“Rising trade tensions have prompted several countries to impose tariffs against China’s steel exports, leading to further uncertainty for global steel markets and complicating Chinese steelmakers’ efforts to sell domestic overcapacity overseas,” said Belinda Schaepe, CREA’s China policy analyst. “To ease these tensions, it is essential that output reduction and greening of China’s domestic steel production accelerate significantly.”
The report underscores the environmental price paid by the world’s largest steel-producing nation, with more than half of global output. The steel sector’s heavy reliance on coal accounts for 17 per cent of China’s total carbon emissions, making it the country’s second-largest emitter.
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