China plans to increase iron ore output, boost use of steel scrap

Steel mill. Stock Image.

China, the world’s top steel producer, said on Monday that it aims to “significantly increase” mines’ iron ore production and boost utilisation of steel scrap, as part of a plan to develop a higher quality, greener ferrous industry.

Making a joint statement with the state planner and environmental regulator, the Ministry of Industry and Information Technology (MIIT) reiterated a desire for consolidation and restructuring in the steel sector.

But no specific goals were given, unlike a draft plan released at the end of 2020 that had aimed for China’s top five steelmakers to account for 40% of total steel output by 2025.

The statement said more than 80% of steel capacity should complete ultra-low emissions reform by 2025, and the industry’s carbon emissions should peak before 2030.

By 2025, China aims to be gathering over 300 million tonnes of steel scrap annually to supply its ferrous industry. A government-backed consultancy had estimated steel scrap supplies stood at around 260 million tonnes in 2020.

The latest plan also aimed to increase output from electric arc furnaces (EAF) to account for over 15% of China’s total crude steel production by 2025. EAF output had accounted for around 10% of total production in 2020, according to the consultancy.

The targets were less ambitious than those contained in a draft plan released by MIIT at the end of 2020. The draft had pencilled in plans for EAF output to account for a minimum 15% of total crude steel production, or a maximum 20% by 2025.

China’s mammoth industrial sector had suffered a power crunch in the second half of 2021 due to coal shortages, forcing the steel sector to be more cautious about shifting to EAFs.

“The changes in the plan compared with draft is probably because authorities want to be more prudent,” said Zhuo Guiqiu, analyst with Jinrui Capital.

However, the regulators said they would stick to overall steel production controls, after China successfully kept its annual crude steel output last year lower than the record level logged in 2020.

China will also encourage steel sector consolidation and restructuring that crosses regions or amid different ownerships, said the statement.

(By Min Zhang and Emily Chow; Editing by Simon Cameron-Moore and Kirsten Donovan)

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