Titanic Footprint & Troubling Numbers

Today, China's steel sector is vast: ~1.02 billion metric tons in 2024, per World Steel Association. Producing each ton releases ~2.33 tons CO₂, vs global average of 1.92 tons. That gap, 0.4 tons CO₂ per ton steel, means China's sector adds ~400 million extra tons of CO₂ yearly.

With steel accounting for ~17% of national CO₂, decarbonising this industry alone could cut China’s total emissions by over 10%.

“China's steel story is the world's climate story,” says Wang Yufei, climate economist at Renmin University.

Policy Genesis & ETS Expansion

Beijing’s “1+N” roadmap (2020) anchors the push to net zero by 2060. Its flagship: ETS CH, the carbon trading market launched July 2021, covering power first (~35% of national CO₂). By late 2024:

• 634 million metric tons CO₂ traded since launch

• Cumulative market value: $6.06 billion

• Current price: ~$12.5/ton (up from $7.4/ton in 2022)

By 2026, eight new sectors enter ETS: steel, cement, aluminium, chemicals & more, together adding another ~35% of China’s emissions.

“Expanding ETS brings steel under real economic pressure to decarbonise,” notes Liu Shizhe, Ministry of Ecology & Environment.

BF-BOF vs EAF: The Carbon Contrast

Blast furnace/basic oxygen furnace, BF-BOF, produces ~90% of China’s steel, using iron ore & coking coal, releasing ~2.1–2.5 tons CO₂/ton steel. Electric arc furnace, EAF, re-melts scrap, with emissions ~0.4–0.8 tons CO₂/ton.

Current capacity (2024):

• BF-BOF: ~960 million metric tons

• EAF: ~143 million metric tons (13–14% share)

Target for 2025 was 20% EAF share (~200 million metric tons steel). Short scrap supply led NDRC to lower goal to 15%.

Scrap Shortage & Structural Bottlenecks

China’s scrap steel in 2024:

• Total consumption: 214 million metric tons

• Only ~30% (≈64 million metric tons) used in EAF; bulk still goes into BF.

Reasons:

• Young steel stock: buildings & infrastructure built after 2000, not yet demolished.

• Preference to blend scrap in BF, cheaper than fully feeding EAF.

• Limited domestic scrap collection network.

To bridge the gap, Beijing targets 300 million metric tons scrap by 2025, partly via:

• Subsidies on new cars & appliances, more depreciation scrap.

• Upgrading recycling networks.

• Adding scrap to “strategic materials” list, restricting export.

Hydrogen Horizons & Pilot Projects

Green hydrogen is key for direct reduced iron (DRI). In 2024, China’s H₂ production hit 36.3 million metric tons (+3.5%), mostly grey/blue. Green H₂ is small but rising: capacity now ~125k tons/year, from plants like:

• Sinopec Kuqa Green H₂: 260 MW electrolysis

• HBIS Zhangjiakou H₂ DRI: 0.6 million metric tons/year, doubling to 1.2 million

• Baosteel Zhanjiang: 1 million metric tons/year H₂ DRI

Cost challenge:

• Production cost fell to $3.85/kg in 2024 (−15.6%)

• Delivered price still $6.69/kg (−13.7%)

• Green premium adds ~$225/metric ton steel

“Transport, not production, is the price killer,” says S&P Global Commodities.

Carbon Cuts, Closures & Quotas

In March 2025, NDRC told the National People’s Congress it will "resolutely restructure steel by production cuts.” Market hears:

• ~50 million metric tons/year cuts coming (≈5% of current production)

• Timeline: by 2025 or next plan by 2030.

NDRC also:

• Blocked new BF-BOF approvals; allowed only new EAFs (7.2 million metric tons in 2024)

• Ordered higher power tariffs for low-rated plants

• Banned local governments from fast-tracking new coal-based steel

"We have to cut to grow greener," an NDRC official told Xinhua.

Technology, Digitalisation & Ore Quality

Beyond big shifts, steelmakers upgrade daily operations:

• Digital twins, AI for energy efficiency

• Switching to higher-grade ore, 65% Fe, to cut emissions

• Carbon capture, utilisation & storage pilots:

  • HBIS plans to capture 0.125 tons CO₂/ton DRI

  • Baowu’s CCUS trials in Shanghai

Combined, these “micro” gains trim ~5–7% CO₂ by 2030, analysts say.

Global Race & Green Steel Demand

Europe's CBAM, Carbon Border Adjustment Mechanism, makes Chinese green steel more competitive abroad. Domestic demand also grows:

• Shipbuilding, automotive, white goods, buildings

• In real estate, a 50 m² flat needs ~2.5 metric tons steel; green steel markup ~$563 (<1% of price)

“Green demand starts niche, becomes norm,” says Xu Le, Baosteel.

Long View: 2050 Scenarios (E3G model)

Year, EAF share, CO₂/ton steel Total CO₂ cut vs 2020

2020, ~10%, 2.33 tons

2030, 25–30%, 1.8–2.0 tons, 15–20%

2040, 40–45%, 1.2–1.4 tons, 30–35%

2050, ~56%, ~1.0–1.2 tons, 39%

Key Takeaways:

• ETS CH expands to steel by 2026, pricing CO₂ at $12.5/ton (and rising).

• Scrap bottlenecks forced 2025 EAF target cut from 20%, 15%.

• Green H₂ production grows, but delivery cost keeps steel premium at ~$225/t.

• By 2050, 56% EAF share could cut CO₂ by 39%.