In the recent outlook seminar for the Chinese steel market in 2025, held alongside the "My Steel" annual conference, a significant dialogue emerged regarding the pressing issues that the steel industry faces in the coming yearsAs officials and experts gathered, the overarching theme revolved around the urgent need for energy-saving measures, carbon reduction, and expectations around low emissionsIt became apparent that carbon trading rights might serve as restrictions on steel supply, which was a consensus among the attendeesThey also highlighted that the industry might undergo further consolidation, which would help expedite the phase-out of outdated production capacitiesGiven the current stage of reduced development in the sector, they unanimously agreed that technological innovation remains the cornerstone for long-term growth.

The discussion zeroed in on how energy conservation and carbon reduction policies could heavily constrain the steel industry's supply chainThe attendees pointed out two pivotal approaches to address the overcapacity dilemma: firstly, by enforcing policies aimed at reducing energy consumption and carbon emissions and, secondly, through mergers and acquisitions designed to eliminate obsolete capacitiesThis aligns with the insights provided by the World Steel Association, which projected that China would need to invest around 500 billion yuan annually for the next thirty years to achieve carbon neutralityThis staggering investment translates to approximately 500 yuan for every ton of steel produced, underscoring the financial demands linked to meeting global environmental standards.

Wang Jianhua, the chief analyst at Shanghai Steel Union, supported this analysis by predicting that the year 2025 would witness the implementation of carbon trading within the steel industry, alongside stringent energy conservation policiesThe executive vice president of Shougang Group's Technology Research Institute, Yu Wei, shed light on the impending regulatory framework by stating that the European Union's Carbon Border Adjustment Mechanism would enter its transition phase on October 1, 2023, with full implementation expected by 2026. Furthermore, certain provinces and cities in China have already taken steps into carbon trading, signifying a noteworthy shift towards sustainability

Advertisements

Shougang is one of the companies actively participating in the carbon exchange market in Beijing, which they consider could serve as a profit center for steel firms demonstrating good low-carbon performance.

Yu Wei elaborated, explaining that the current carbon price in Beijing hovers around 100 yuan per ton of carbon dioxideHe posited that with growing low-carbon requirements over time, carbon prices will likely continue to escalateThis highlights the necessity for steel enterprises to prepare for these changing dynamics to manage rising costs realisticallyTo bolster competitiveness while aligning with environmental mandates, companies must adapt their operational strategies accordingly.

Another angle explored during the conference was how industry consolidations could facilitate the exit of outdated capacitiesWang Jianhua explained that looking back at history, periods of excess capacity have often prompted significant mergers within the global steel sector, thereby enhancing regional market control, increasing production efficiency, and improving enterprise profitabilityThese trend lines offer a blueprint for Chinese steel manufacturers to observe as they navigate through their current challenges.

International examples further illustrate this trendJapan’s steel industry underwent a substantial transformation post-peak consumption, entering a decade-long phase of structural adjustment followed by a twenty-year period of industry mergers and integrationsThese strategies paved the way for sustainability and resilience within Japan’s steel framework.

According to Jiang Wei, the vice president and secretary-general of the China Steel Industry Association, a proposal on establishing effective mechanisms for capacity exits is under consideration, with plans to present key recommendations to the government by the end of the yearThese recommendations are aimed at pushing forward ongoing mergers and implementing the 'Three Major Transformation Projects', which are essential to the industry's evolution.

The conference also emphasized the critical role of technological innovation in increasing the added value for steel enterprises

Advertisements

Advertisements

Advertisements

Advertisements