The Centre for Research on Energy and Clean Air’s biannual review of China’s steel sector in 2024 highlights the gap between current industry trends and the country’s climate targets. Despite declining domestic demand, crude steel production surpassed one bln tons for the fifth consecutive year, leading to persistent oversupply and eroding profitability. Meanwhile, China’s climate goals require a major transition in steelmaking to achieve carbon neutrality by 2060, but overcapacity remains a key obstacle.
The report finds that China is not on track to meet its 2025 climate targets, as low-carbon electric arc furnace (EAF) steelmaking remains below 10 pct of output, far short of the 15 pct goal. Limited recycling rates and economic incentives favoring blast furnaces over EAFs contribute to this shortfall. Steel exports surged to 111 mln tons in 2024, the highest in nearly a decade, but rising global trade tensions may challenge this reliance on exports in 2025.
To curb overcapacity and accelerate green steel production, China needs to reduce blast furnace capacity by at least 200 mln tons per year by 2025 and another 150 mln tons by 2030. However, between 2021 and 2024, authorities approved over 140 mln tons of new blast furnace capacity, despite the risks of stranded assets. Hydrogen-based steelmaking remains underdeveloped, with only 2.3 mln tons per year approved over the same period, well below the level needed for long-term climate goals.
A policy shift is underway, marked by the suspension of new steel project approvals in August 2024. The Centre for Research on Energy and Clean Air recommends accelerating low-carbon technologies like EAFs and green hydrogen, cutting coal-based blast furnace capacity, and halting new approvals to avoid stranded assets. Strengthening the carbon market by including steel, cement, and aluminum industries, alongside a shift to a cap-and-trade system, is crucial for reducing emissions. Greater investment in renewable energy and international collaboration will also be key to ensuring a successful transition. The Centre for Research on Energy and Clean Air is an independent nonprofit based in Finland with staff across Asia and Europe, focused on researching air pollution trends, causes, impacts, and solutions.
