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China finalizing “high-quality” growth in steel industry

ABSTRACT

China’s Ministry of Industry and Information Technology (MIIT), the regulating body of the country’s industrial sector including steel mills, is collecting the public feedbacks until January 31 for the final version of the “high-quality” development guidelines for the domestic steel mills over the 14th Five-Year Plan period (2021-2025) and over an even longer term until 2035, Mysteel Global noted from MIIT’s notice.

The 15-page guidance lists the detailed criteria in all the key aspects including technological upgrading, automation and low-carbon emission in production, capacity distribution optimization, and competitiveness enhancement for an eco-friendly and sustainable development in the Chinese steel sector.

Capacity distribution and industrial optimization


Among the key targets are that the country should increase the steel output by electric arc furnaces (EAFs) to over 15% of the country’s total or 20% at the best, as well scrap use in steelmaking to 30% by 2025.


For the past few years, EAFs just made up for about 10% of the country’s total steel production and steel scrap utilization amounted to about 20% of the country’s total at maximum for both.


MIIT proposes a 45% self-sufficiency in ferrous content raw materials iron ore and scrap by 2025, which is hard to achieve though the targeted 300 million tonnes of scrap consumption in five years appear rather feasible, as reported.


To support the domestic steel scrap industry, MIIT proposes building up sizeable scrapyards with a complete industrial chain, launching spot scrap trading platforms and scrap futures, and erecting EAF capacities in the industrial parks on the outskirts of the Chinese cities with either the access to cross-region grids or the coal supply and power houses nearby.


Besides, China’s top five mills should produce 40% of the country’s total steel, or the top ten 60% of the total, and as for the productivity, the per capita steel output should be at 1,200 tonnes/year for the whole industry or 2,000 t/y for the newly-built steel plants.


By 2019, the country’s top ten steel mills contributed to 36.6% of the country’s total steel production, Mysteel Global notes.


The noticeable change of tone in the new proposal is that Beijing will no longer approve projects of relocating steel capacities to the coastal areas in principle and it, instead, encourages steel mills to upgrade at the existing works so long as they can meet the “ultra-low emission” standards.


Low carbon emission in steel production


In the aspect, MIIT requests 80% of the steel mills or 100% of the steel mills in the heavily polluting regions to complete the “ultra-low emission” rectification works by 2025 thus to reduce total waste emission by 20%, power consumption down by 5% in total and unit, water consumption by unit down by over 10%, and water reuse rate exceeds 98%.


All these are to help the country to peak carbon emission earlier than 2030, as the documentation explained. The steel sector contributes to over 18% of the country’s total carbon emission, Mysteel Global understands.


“These five years are crucial to the steel industry or the country’s industrial sector in general to reduce carbon emission, as climate change has become a pressing issue, and related measures need to be formulated and executed to push all the related industries towards the direction (eco-friendliness),” a Shanghai-based senior market analyst commented.


The document warns that all the domestic steel mills that fail to meet the standards by the deadline should be suspended operations until all the necessary rectification is completed.


Smart manufacturing and higher efficiency


In five years, the Chinese steel mills are encouraged to intensify digitalization and automation in their operations, with 80% of the key production process control digitalized, and 50% of the production facilities should be digitalized, and China should have nurtured over 50 smart steel companies by 2025.


China’s leading steel mills have been picking up the pace in this than many of their peers, a second Shanghai-based senior analyst acknowledged.


“Many of the Chinese steel companies have installed software for operations or trading, but to maximize the effectiveness, hardware such as robots is just as necessary, while only a few mills have invested heavily in this,” he said, adding, “automation is more for workplace safety and labour cost reduction, but mill will usually compare the cost against the returns, and some give up on the initiative due to long return periods.”


Baoshan Iron & Steel Co (Baoshan Steel), the Shanghai-listed arm of China’s top steel producer Baowu Steel Group, has been role model among the Chinese steel mills, as by late 2019, it already engaged 479 robots and 102 driverless vehicles, which reduced human resources by 2,500 and trimmed the number of the control centres by 50, as reported.


Written by Olivia Zhang, zhangwd@mysteel.com

Edited by Hongmei Li, li.hongmei@mysteel.com