March 9, 2021 11:51 PM PST
S&P Global Platts Analytics expects a number of carbon
emissions-related policy changes to China's steel industry to be
announced during China's National People's Congress and Chinese People's
Political Consultative Conference, or the Two Sessions, starting in
Beijing on March 4.To get more news about [url=https://www.shine.cn/2021-Two-Sessions/]LiangHui 2021[/url], you can visit shine news official website.
Platts expects that to achieve carbon neutrality by 2060, a series
of policy changes comprising steel production reduction, steel export
rebate cuts, the increase of scrap utilization, development of electric
arc furnaces, as well as the establishment of a carbon emissions quota
trade, are likely to be announced during or shortly after the NPC and
CPPCC.
China's Ministry of Industry and Information Technology has cited
the plan to cut steel output no less than three times already in 2021 as
the most effective way to reduce emissions. But this could hurt the
profitability of steel end-users, or even drive up inflation. This is
because steel demand is expected to continue rising modestly in 2021, so
any year-on-year steel output decline could trigger a sharp rise in
steel prices.
Platts Analytics expects steel output cuts to occur in the second
half of 2021, as demand is likely be lower in H2 than in H1.
Implementation of emissions quotas could be a way to enforce production
cuts if emissions quotas allocated to mills are exceeded.
The Ministry of Ecology and Environment is taking the lead in
setting carbon emissions quotas and a trading mechanism. Some mill
sources said setting emission quotas for hundreds of steel mills is
complex, and it remained unclear when more details will be announced. If
steel output cuts began to hurt downstream users, they could be
loosened or lifted.Export rate reductions could occur later this year to
discourage exports and indirectly steel production. But cutting export
rebates by too much and too quickly will hurt steel industry
profitability. The average profit margin for China Iron & Steel
Association members was 4.4% in 2020, down from 4.6% in 2019.
A likely scenario could see rebates reduced for comparatively
low-end steel products, such as long steel and hot-rolled coil, from 13%
to 9%, while high-end products, like cold-rolled coil and hot-dip
galvanized coil, remain unchanged at 13%.This strategy is expected to be
reiterated during the Two Sessions. But to establish a mature scrap
supply chain is likely to take another two to three years, while
electricity shortages will continue to hold back the development of
electric arc furnaces or EAFs.
China plans to increase its domestic scrap supply to around 300
million mt/year by 2025, up from 240 million mt/year in 2019, meaning
the increase of scrap supply is only about 10 million mt/year over
2020-2025.Scrap imports may amount to just a few million mt in 2021, as
recovering overseas demand for scrap has already pushed up overseas
scrap prices.
Platts Analytics forecasts that China's net EAF capacity expansion
will be about 13.3 million mt/year in 2021, taking the country's total
EAF capacity to about 196 million mt/year by the end of 2021. This would
account for 15% of China's total crude steel capacity. However, the net
expansion will slow down after 2021 to probably just 7 million mt/year
in total over 2022-2024.Platts Analytics believes blast furnaces and
converters will remain the main route to making iron and steel, with
EAFs a supplement. However, gradually increasing scrap supply will help
to increase scrap utilization rates in converters. The scrap ratio in
Chinese converters can be boosted to as high as 20%-30%, while the ratio
surveyed by Platts in Q4 2020 averaged 18%.
S&P Global Platts Analytics expects a number of carbon
emissions-related policy changes to China's steel industry to be
announced during China's National People's Congress and Chinese People's
Political Consultative Conference, or the Two Sessions, starting in
Beijing on March 4.To get more news about [b][url=https://www.shine.cn/2021-Two-Sessions/]LiangHui 2021[/url][/b], you can visit shine news official website.
Platts expects that to achieve carbon neutrality by 2060, a series
of policy changes comprising steel production reduction, steel export
rebate cuts, the increase of scrap utilization, development of electric
arc furnaces, as well as the establishment of a carbon emissions quota
trade, are likely to be announced during or shortly after the NPC and
CPPCC.
China's Ministry of Industry and Information Technology has cited
the plan to cut steel output no less than three times already in 2021 as
the most effective way to reduce emissions. But this could hurt the
profitability of steel end-users, or even drive up inflation. This is
because steel demand is expected to continue rising modestly in 2021, so
any year-on-year steel output decline could trigger a sharp rise in
steel prices.
Platts Analytics expects steel output cuts to occur in the second
half of 2021, as demand is likely be lower in H2 than in H1.
Implementation of emissions quotas could be a way to enforce production
cuts if emissions quotas allocated to mills are exceeded.
The Ministry of Ecology and Environment is taking the lead in
setting carbon emissions quotas and a trading mechanism. Some mill
sources said setting emission quotas for hundreds of steel mills is
complex, and it remained unclear when more details will be announced. If
steel output cuts began to hurt downstream users, they could be
loosened or lifted.Export rate reductions could occur later this year to
discourage exports and indirectly steel production. But cutting export
rebates by too much and too quickly will hurt steel industry
profitability. The average profit margin for China Iron & Steel
Association members was 4.4% in 2020, down from 4.6% in 2019.
A likely scenario could see rebates reduced for comparatively
low-end steel products, such as long steel and hot-rolled coil, from 13%
to 9%, while high-end products, like cold-rolled coil and hot-dip
galvanized coil, remain unchanged at 13%.This strategy is expected to be
reiterated during the Two Sessions. But to establish a mature scrap
supply chain is likely to take another two to three years, while
electricity shortages will continue to hold back the development of
electric arc furnaces or EAFs.
China plans to increase its domestic scrap supply to around 300
million mt/year by 2025, up from 240 million mt/year in 2019, meaning
the increase of scrap supply is only about 10 million mt/year over
2020-2025.Scrap imports may amount to just a few million mt in 2021, as
recovering overseas demand for scrap has already pushed up overseas
scrap prices.
Platts Analytics forecasts that China's net EAF capacity expansion
will be about 13.3 million mt/year in 2021, taking the country's total
EAF capacity to about 196 million mt/year by the end of 2021. This would
account for 15% of China's total crude steel capacity. However, the net
expansion will slow down after 2021 to probably just 7 million mt/year
in total over 2022-2024.Platts Analytics believes blast furnaces and
converters will remain the main route to making iron and steel, with
EAFs a supplement. However, gradually increasing scrap supply will help
to increase scrap utilization rates in converters. The scrap ratio in
Chinese converters can be boosted to as high as 20%-30%, while the ratio
surveyed by Platts in Q4 2020 averaged 18%.